INCOTERMS® 2010 Rules – a reprint

Guide to the Incoterms® 2010 Rules
As reprinted from the ISM website.

The Incoterms® 2010 rules* (International Commercial Terms) were developed by the International Chamber of Commerce (ICC) as a uniform set of rules to clarify the costs, risks and obligations of buyers and sellers in international commercial transactions.  Because they address issues relating to import and export, Incoterms® 2010 rules are most appropriate for use in international shipping; they are, however, used for U.S. domestic shipping as well.

Incoterms® 2010 rules are periodically revised and multiple versions are available for use by contracting parties.  The Incoterms® 2010 rules became effective January 1, 2000, and remain in effect. The Incoterms® 2010 rules are effective as of January 1, 2011.

Refer to the ICC Web site at www.iccwbo.org/Incoterms/id3040/index.html for information about these terms and their definitions, which are copyrighted by the ICC.

Note:  Although the new Incoterms® 2010 rules became available for use as of January 1, 2011, Incoterms®  2000 rules continue to be available.  It is incumbent upon contracting parties to determine which term they want to use and to designate the version being applied.

For some time Incoterms® rules have consisted of 13 terms. Incoterms® 2010 rules eliminate four of the previously-existing terms (DDU, DES, DEQ and DAF) and add two new terms (DAT and DAP), resulting in a total of 11 terms.  The new version is made available for both domestic and international use; contracting parties should, however, review the applicability of these terms to the domestic environment prior to applying them.

The terms are structured to increase incrementally the obligations (control, risk and cost) on one party while decreasing the obligations of the other, depending on the specific term chosen.  Each term clarifies which party is responsible for:

  • Inland freight (transportation within the origination country)
  • Forwarder selection
  • Export clearance
  • Carrier selection and scheduling
  • International freight
  • Import clearance
  • On-carriage (transportation within the destination country)

Delivery occurs (and risk of loss transfers) at the point designated by the term selected.  Transfer of title is NOT covered by any of the Incoterms® 2010 rules and must be separately specified by the parties.

Incoterms® 2010 rules can be divided into two groups – multi-modal (available for multiple forms of transport, including land, air and waterway transportation) and single mode (applicable only to waterway transportation). The terms in each group are listed on page 2 in order of increasing responsibility for the seller (and correspondingly decreasing responsibility for the buyer).  So, for example, using the term EXW makes the seller responsible only for making the goods available at its own premises; delivery occurs and risk of loss transfers at that point.  When the term DDP is used, the seller becomes responsible for everything except on-carriage where the location for delivery is not the buyer’s actual location.  DDP is the only Incoterms® rule that makes the seller responsible for import clearance.

Buyers in the United States who are likely to be familiar with delivery terms defined within Articles 2 and 2A of the Uniform Commercial Code (UCC) should pay particular attention to the overlap in the use of certain terms/abbreviations between the Incoterms® 2010 rules and the UCC.  “Free on board” (F.O.B.), “free alongside” (F.A.S.) and “C.I.F.” are all used in the UCC, but their definitions there are much different from the definition of the same terms in the Incoterms® 2010 rules. Under the Incoterms® 2010 rules all three of the overlapping terms (FOB, FAS and CIF) fall into the “single mode” group, meaning they can only be used for waterway transportation.  Under the UCC only F.A.S. is limited to use with a vessel.

Numerous publications and seminars are available through the International Chamber of Commerce (http://store.iccbooksusa.net/ or http://www.iccbooks.com/Home/Home.aspx) as well as from other organizations explaining in depth the application of both the Incoterms® 2000 rules and Incoterms® 2010 rules.

  TERM – DEFINITION
The multi-modal (available for multiple forms of transport, including land, air and waterway transportation) terms are:
⊕ Unchanged in Incoterms® 2010 rules Ex works (EXW) named place (seller’s location) –

An Incoterms® rule under which the price that the seller quotes applies only at the point of origin. The buyer takes possession of the shipment at the point of origin and bears all costs and risks associated with transporting the goods to the destination. This Incoterms® rule is regarded as the most open-ended. There is generally nothing specific regarding delivery and there is a mutually convenient pickup time for exporter and importer agreed upon. Used for any mode of transport.

See Also Incoterms® rules  

Compare: Delivered Duty Paid

⊕ Unchanged in Incoterms® 2010 rules Free Carrier At (FCA) named place (seller’s country) –

An Incoterms® rule under which seller delivers goods, cleared for export, to the buyer-designated carrier at a named location. Used for any mode of transport. Seller must load goods onto the buyer’s carrier. The key document signifying transfer of responsibility is receipt by carrier to exporter.

See Also: Incoterms® rules

⊕ Unchanged in Incoterms® 2010 rules Carriage Paid To (CPT) named place of destination –

An Incoterms® rule used for any mode of transportation. Buyer assumes title and risk of loss when goods are delivered to the carrier. Seller pays shipping to destination. CPT delivery takes place when the exporter hands over goods to the carrier. The exporter is given bill of lading or equivalent document (air waybill, sea waybill, multi-modal bill of lading).

See Also: Incoterms® rules

Compare: Carriage and Insurance Paid To

⊕ Unchanged in Incoterms® 2010 rules Carriage Insurance Paid (CIP) named place of destination –

An Incoterms® rule under which seller delivers goods to seller-designated carrier, pays cost of carriage to named destination and must obtain insurance to cover buyer’s risk of loss in transit. Buyer bears risk of loss and any additional costs after seller’s delivery to carrier, protected by seller’s insurance. Used for any mode of transportation; same as CPT, but seller pays for insurance and names buyer as beneficiary.

See Also: Incoterms® rules

Compare: Carriage Paid To

⊕ Eliminated in Incoterms® 2010 rules Delivered Duty Unpaid (DDU)  named place of destination –

An Incoterms® rule under which seller bears the risk and expense of getting the goods to a named destination, but excluding duties, taxes and other official charges payable on import. Some variations on DDU are possible if the seller is to pay some of the import charges. Delivery takes place when the exporter places goods at the disposal of the importer in city of delivery. There is no corresponding transportation document, although a bill of lading is usually used. Used for any mode of transportation. Same as Delivered Ex Quay (DEQ), except that the buyer and seller can specify delivery of the goods to a warehouse or other destination point. Seller must arrange for ground transport in the buyer’s country. Buyer bears responsibility for import customs duties.

This term is defined in the Incoterms® 2000 rules.  It has been eliminated in the Incoterms® 2010 rules, but the Incoterms® 2000 rules can still be used by contracting parties if they so agree.

See Also: Incoterms® rules

Compare: Delivered Duty Paid, Delivered Ex Quay, Delivered at Terminal, Delivered at Place

⊕ New in Incoterms® 2010 rules Delivered at Terminal (DAT) named place of destination –

An Incoterms® rule under which seller delivers goods to a named terminal in the destination country.  Buyer is responsible for import clearance and any further in-country carriage.  This term is one of two terms considered to be replacement terms for Delivered Duty Unpaid (DDU), which is eliminated from Incoterms® 2010.

See Also:  Incoterms® rules

Compare:  Delivered at Place, Delivered Duty Unpaid, Delivered Duty Paid

⊕ New in Incoterms® 2010 rules Delivered at Place (DAP) named place of destination –

An Incoterms® rule under which seller delivers goods to the buyer’s facility or another named location (other than a terminal) in the destination country.  Buyer is responsible for import clearance and any further in-country carriage.  This term is one of two terms considered to be replacement terms for Delivered Duty Unpaid (DDU), which is eliminated from Incoterms® 2010 rules.

See Also:  Incoterms® rules

Compare:  Delivered at Terminal, Delivered Duty Unpaid, Delivered Duty Paid

⊕ Unchanged in Incoterms® 2010 rules Delivered Duty Paid (DDP) named place of destination –

An Incoterms® rule under which seller (exporter) is responsible for all costs involved in delivering the goods to a named place of destination and for clearing customs in the country of import. Seller provides literally door-to-door delivery, including customs clearance in the port of export and the port of destination. Thus, seller bears the entire risk of loss until goods are delivered to the buyer’s premises. Full term is “DDP named place of destination.” Delivery takes place when exporter places goods at disposal of importer in city of delivery. There is no corresponding transportation document, although bill of lading is usually used. Used for any mode of transportation. Seller bears all risk and customs responsibilities until the goods are delivered to a specified location and clear import customs. Buyer assumes risk and title when the goods are delivered to the buyer’s specified location.

See Also: Incoterms® rules

Compare: Delivered Duty Unpaid, Ex Works, Free On Board (UCC), Delivered at Terminal, Delivered at Place

The single mode terms (which can only be used with waterway transportation) are:
⊕ Unchanged in Incoterms® 2010 rules Free Alongside Ship (FAS) named vessel at loading port –

An Incoterms® rule used only for maritime trade (transport by vessel) Under this arrangement, the supplier agrees to deliver the goods in proper condition alongside the vessel. The buyer assumes all subsequent risks and expenses after delivery to the pier. This term can only be used for waterway transportation. 

See also: Incoterms® rules

Compare: F.A.S – UCC

⊕ Unchanged in Incoterms® 2010 rules Free On Board (FOB) named vessel at loading port –

An Incoterms® rule used only for maritime trade (transport by vessel) under which responsibility for the shipment transfers from exporter to importer when shipment is loaded aboard the vessel. Seller must load the goods onto the ship. Centuries of maritime tradition says that the FOB point is the Ship’s Rail, also referred to as “Freight on Board.” This is the older maritime term of trade. If the freight falls while loading, however, it is the exporter’s responsibility if it lands on quay, but it is the importer’s responsibility if it lands on ship. The documentation of delivery is the ocean bill of lading or sea waybill. This term can only be used for waterway transportation.

See Also: Freight Collect, Incoterms® rules

Compare: Free On Board – UCC

⊕ Unchanged in Incoterms® 2010 rules Cost & Freight (CFR)  named port of destination

An Incoterms® rule under which goods are considered to be “delivered” (and buyer assumes risk of loss) when they pass the ship’s rail in the port of shipment.  The seller is responsible for clearing the goods for export and for costs and freight to bring the goods to the destination port.  This term can only be used for waterway transportation.

See Also: Incoterms® rules

Compare: C.&F. – UCC, C.I.F – UCC, CIF – Incoterm, Carriage Paid To

⊕ Unchanged in Incoterms® 2010 rules Cost, Insurance & Freight (CIF) named port of destination –

This Incoterms® rule is similar to Cost & Freight (CFR) where goods are considered to be “delivered” (and buyer assumes risk of loss) when they pass the ship’s rail in the port of shipment.  The seller is responsible for clearing the goods for export and for costs and freight to bring the goods to the destination port.  Under CIF the seller must also obtain marine insurance against buyer’s risk of loss or damage in transit.  This term can only be used for waterway transportation.

See Also: Incoterms® rules

Compare: C.&F. – UCC, C.I.F – UCC, Cost and Freight, Carriage Insurance Paid

⊕ Eliminated in Incoterms® 2010 rules Delivered Ex Ship (DES) named port

An Incoterms® rule under which seller’s delivery obligation is satisfied when goods are placed at buyer’s disposition on board a vessel at a designated destination port, not cleared for import.

This term is defined in the Incoterms® 2000 rules.  It has been eliminated in Incoterms® 2010 rules, but Incoterms®  2000 rules can still be used by contracting parties if they so agree.

See Also: Incoterms®  rules

Compare: Delivered Ex Quay

⊕  Eliminated in Incoterms® 2010 rules Delivered Ex Quay (DEQ) named port

An Incoterms® rule used for ship transport. Signifies that the seller is responsible for all risks and costs incurred to have the goods delivered and unloaded at a named port of destination. This includes the obligation to contract and pay for freight and transportation costs by sea or inland waterway, unloading fees, export and import licensing fees, and other taxes (unless specifically excluded in the contract). The buyer is obligated only to assist in obtaining any import license or other official authorization necessary to import the goods.

This term is defined in the Incoterms® 2000 rules.  It has been eliminated in the Incoterms® 2010 rules, but Incoterms®  2000 rules can still be used by contracting parties if they so agree.

See Also: Incoterms® rules

Compare: Delivered Ex Ship

⊕ Eliminated in Incoterms® 2010 rules Delivered at Frontier (DAF)

An Incoterms® rule under which seller’s delivery obligation is satisfied when goods are placed at buyer’s disposition on arriving means of transportation, cleared for export but not import, and not unloaded. Delivery takes place when the vehicle is placed at disposal of importer at designated border city. There is no specific documentation for transfer, although some carriers provide some. Used for any mode of transportation. Buyer acquires title, risk and responsibility for import customs clearance.

This term is defined in the Incoterms® 2000 rules.  It has been eliminated in the Incoterms® 2010 rules, but the Incoterms® 2000 rules can still be used by contracting parties if they so agree.

See Also: Incoterms® rules

—end—


Reference: https://www.instituteforsupplymanagement.org/glossary/Glossary.cfm
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