Post on 13-Mar-2018
TRADE LOGISTICS / Incoterms
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GUIDE TO Incoterms
TRADE LOGISTICS / Incoterms
www.tradelogistics.co.za • info@tradelogistics.co.za • 0861 0 TRADE (87233)
International Commercial Terms
When global companies enter into contracts to buy and sell goods they are free to
negotiate specific terms. These terms include the price, quantity, and characteristics of
the goods. Every international contract also contains what is referred to as an Incoterm,
or international commercial term. Incoterms are not laws but precise definitions of the
costs, risks and obligations of both parties (the seller and the buyer) in a contract where
an international transaction takes place. Applying Incoterms to sale and purchase
contracts makes global trade easier and helps partners in different countries
understand one another. Note that when we refer to the ‘seller’ it means the seller,
manufacturer or exporter, and when we refer to the ‘buyer’ we mean the buyer or
importer.
The parties to the transaction select the Incoterms, which determine who pays the cost
of each transportation segment, who is responsible for loading and unloading of goods,
and who bears the risk of loss at any given point during an international shipment.
Incoterms are not mandatory and therefore not implied by default in an international
sales contract. If a contractor wants to use them, they must be specifically included in
the contract.
Incoterms are revised periodically. The current version is called Incoterms 2010. All
contracts made under Incoterms 2000 (the previous version) remain valid. Although we
recommend using Incoterms 2010, parties can agree to choose any version of the
Incoterms rules. It is important, however, to clearly specify which version you have
chosen. A summary of the main difference between the 2000 and 2010 incoterms is
given here.
Below is a summary of the most commonly used 2000 and 2010 incoterms.
TRADE LOGISTICS / Incoterms
TRADE LOGISTICS / Incoterms
Incoterms 2010
Below are some of the key points to consider regarding the 2010 incoterms. A summary
of the differences between incoterms 2000 and 2010 is given here.
EXW Ex works
Any transport Mode
Where there is more than one mode of transport
FCA Free Carrier
Any transport Mode
Where there is more than one mode of transport
SELLER
Make sure that the goods are
available
suitably packaged and
at the specified place (this is usually
the seller’s factory/ storage area)
BUYER
Responsibilities include:
loading the goods onto a vehicle
all export procedures
taking care of costs for all onward
transport and costs after collecting
the goods
LOOK OUT FOR:
The seller does not have to load the goods, but if he does so, it is at the buyer’s risk
SELLER
Delivers the goods, cleared for
export, to the carrier selected by
the Buyer
Loads the goods if the carrier
pickup is at the Seller's premises
BUYER
After goods have been delivered at
the named place, buyer bears the
costs and risks of moving the goods
to destination
NOTE:
FCA is the rule of choice for containerised goods where the buyer arranges for
the main carriage
TRADE LOGISTICS / Incoterms
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FAS Free Alongside Ship
Goods transported by sea or inland waterway
FOB Free on Board
Goods transported by sea or inland waterway
CFR Cost and Freight
Goods transported by sea or inland waterway
SELLER
The Seller delivers the goods
(cleared for export) to the origin
port
BUYER
from that point, the Buyer bears all
costs and risks of loss or damage
the buyer is responsible for loading
the goods
NOTE:
For containerised goods, consider FCA instead.
SELLER
delivers the goods on board the
ship and clears the goods for export
BUYER
from that point, the Buyer bears all
costs and risks of loss or damage
NOTE: For containerised goods, consider FCA instead
SELLER
clears the goods for export and
pays the costs of moving the goods
to destination
BUYER
bears all risks of loss or damage
once the goods have been loaded
on board
NOTE:
The seller is not responsible for insurance of the goods on the main carriage
For containerised goods, consider CPT instead
TRADE LOGISTICS / Incoterms
www.tradelogistics.co.za • info@tradelogistics.co.za • 0861 0 TRADE (87233)
CIF Cost Insurance and Freight
Goods transported by sea or inland waterway
CPT Carriage Paid To
Any transport Mode
Where there is more than one mode of transport
CIP Carriage and Insurance Paid To
Any transport Mode
Where there is more than one mode of transport
SELLER
Arrange carriage to the named
place
NOT responsible for insuring goods
to the named place
BUYER
From the time the goods are
transferred to the first carrier, the
Buyer bears the risks of loss or
damage
LOOK OUT FOR:
Terminal Handling Charges (THC) are charges collected by the terminal authorities
at each port against handling equipments and maintenance. The buyer should fine
out whether these charges have been added to the carrier’s freight rates, so as to
avoid any surprises.
SELLER
clears the goods for export and
pays the costs of moving the goods
to destination
purchases the cargo insurance
BUYER
bears all risks of loss or damage
once the goods have been loaded
on board
NOTE:
Although the seller is responsible for the insurance, the rule only requires a
minimal level of cover which might be unrealistic. It might be necessary to deal
with the level of cover elsewhere in the commercial agreement.
For containerised goods, consider CIP instead
TRADE LOGISTICS / Incoterms
www.tradelogistics.co.za • info@tradelogistics.co.za • 0861 0 TRADE (87233)
DAT Delivered at Terminal
Any transport Mode
Where there is more than one mode of transport
SELLER
Responsible for
arranging carriage to the named
place
insuring the goods
BUYER
From the time the goods are
transferred to the first carrier, the
Buyer bears the risks of loss or
damage
SELLER
delivers when the goods, once
unloaded from the arriving means
of transport, are placed at the
Buyer's disposal at a named
terminal at the named port or place
of destination.
bears all risks involved in bringing
the goods to and unloading them
at the terminal at the named port or
place of destination
BUYER
Risk transfers from seller to buyer
when the goods have been
unloaded
Buyer is responsible for:
import clearance
any applicable local taxes or
import duties
LOOK OUT FOR:
Terminal Handling Charges (THC) are charges collected by the terminal
authorities at each port against handling equipments and maintenance. The
buyer should fine out whether these charges have been added to the carrier’s
freight rates, so as to avoid any surprises.
Although the seller is responsible for the insurance, the rule only requires a
minimal level of cover which might be unrealistic. It might be necessary to deal
with the level of cover elsewhere in the commercial agreement.
LOOK OUT FOR:
Many ports are very large, therefore it is important to clearly specify the place for
delivery
Parties should clarify who would bear the costs of Terminal Handling Charges (if
they apply)
TRADE LOGISTICS / Incoterms
www.tradelogistics.co.za • info@tradelogistics.co.za • 0861 0 TRADE (87233)
DAP Delivered at Place
Any transport Mode
Where there is more than one mode of transport
DDP Delivered Duty Paid
Any transport Mode
Where there is more than one mode of transport
SELLER
responsible for arranging carriage
and for delivering the goods (which
is ready for unloading from the
arriving carriage) at the named
place
bears all risks involved in bringing
the goods to the named place
BUYER
Risk transfers from seller to buyer
when the goods are available for
unloading
Unloading is at buyer’s risk
Is responsible for:
import clearance
any applicable local taxes or
import duties
NOTE:
This rule can be used to replace the Incoterms 2000 rules DAF, DES and DDU
SELLER
delivers the goods -cleared for
import - to the Buyer at destination
bears all costs and risks of moving
the goods to destination, including
the payment of customs duties and
taxes
BUYER
Risk transfers from seller to buyer
when the goods are available for
unloading
NOTE: This rule places the maximum responsibility on the seller.
It is the only rule that requires the seller to take responsibility for import clearance
and payment of taxes and/ or import duty
TRADE LOGISTICS / Incoterms
www.tradelogistics.co.za • info@tradelogistics.co.za • 0861 0 TRADE (87233)
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