INTRODUCTION Taken from Incoterms 2010, available at the ICC Bookstore

Main features of the Incoterms 2010 rules

1. Two new Incoterms rules DAT and DAP have replaced the Incoterms 2000 rules

DAF, DES, DEQ and DDU

The number of Incoterms rules has been reduced from 13 to 11. This has been achieved by substituting

two new rules that may be used irrespective of the agreed mode of transport DAT, Delivered at

Terminal, and DAP, Delivered at Place for the Incoterms 2000 rules DAF, DES, DEQ and DDU.

Under both new rules, delivery occurs at a named destination: in DAT, at the buyers disposal unloaded

from the arriving vehicle (as under the former DEQ rule); in DAP, likewise at the buyers disposal, but

ready for unloading (as under the former DAF, DES and DDU rules).

The new rules make the Incoterms 2000 rules DES and DEQ superfluous. The named terminal in DAT

may well be in a port, and DAT can therefore safely be used in cases where the Incoterms 2000 rule

DEQ once was. Likewise, the arriving vehicle under DAP may well be a ship and the named place of

destination may well be a port: consequently, DAP can safely be used in cases where the Incoterms

2000 rule DES once was. These new rules, like their predecessors, are delivered, with the seller bearing

all the costs (other than those related to import clearance, where applicable) and risks involved in bringing

the goods to the named place of destination.

2. Classification of the 11 Incoterms 2010 rules

The 11 Incoterms 2010 rules are presented in two distinct classes:

RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW EX WORKS

FCA FREE CARRIER

CPT CARRIAGE PAID TO

CIP CARRIAGE AND INSURANCE PAID TO

DAT DELIVERED AT TERMINAL

DAP DELIVERED AT PLACE

DDP DELIVERED DUTY PAID

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS FREE ALONGSIDE SHIP

FOB FREE ON BOARD

CFR COST AND FREIGHT

CIF COST INSURANCE AND FREIGHT

The first class includes the seven Incoterms 2010 rules that can be used irrespective of the mode of

transport selected and irrespective of whether one or more than one mode of transport is employed.

EXW, FCA, CPT, CIP, DAT, DAP and DDP belong to this class. They can be used even when there is no

maritime transport at all. It is important to remember, however, that these rules can be used in cases

where a ship is used for part of the carriage.

In the second class of Incoterms 2010 rules, the point of delivery and the place to which the goods are

carried to the buyer are both ports, hence the label sea and inland waterway rules. FAS, FOB, CFR and

CIF belong to this class. Under the last three Incoterms rules, all mention of the ships rail as the point of

delivery has been omitted in preference for the goods being delivered when they are on board the

vessel. This more closely reflects modern commercial reality and avoids the rather dated image of the risk

swinging to and fro across an imaginary perpendicular line.

3. Rules for domestic and international trade

Incoterms rules have traditionally been used in international sale contracts where goods pass across

national borders. In various areas of the world, however, trade blocs, like the European Union, have

made border formalities between different countries less significant. Consequently, the subtitle of the

Incoterms 2010 rules formally recognizes that they are available for application to both international and

domestic sale contracts. As a result, the Incoterms 2010 rules clearly state in a number of places that

the obligation to comply with export/import formalities exists only where applicable.

Two developments have persuaded the ICC that a movement in this direction is timely. Firstly, traders

commonly use Incoterms rules for purely domestic sale contracts. The second reason is the greater

willingness in the United States to use Incoterms rules in domestic trade rather than the former Uniform

Commercial Code shipment and delivery terms.

4. Guidance Notes

Before each Incoterms 2010 rule you will find a Guidance Note. The Guidance Notes explain the

fundamentals of each Incoterms rule, such as when it should be used, when risk passes, and how costs

are allocated between seller and buyer. The Guidance Notes are not part of the actual Incoterms 2010

rules, but are intended to help the user accurately and efficiently steer towards the appropriate

Incoterms rule for a particular transaction.

5. Electronic communication

Previous versions of Incoterms rules have specified those documents that could be replaced by EDI

messages. Articles A1/B1 of the Incoterms 2010 rules, however, now give electronic means of

communication the same effect as paper communication, as long as the parties so agree or where

customary. This formulation facilitates the evolution of new electronic procedures throughout the lifetime

of the Incoterms 2010 rules.

6. Insurance cover

The Incoterms 2010 rules are the first version of the Incoterms rules since the revision of the Institute

Cargo Clauses and take account of alterations made to those clauses. The Incoterms 2010 rules place

information duties relating to insurance in articles A3/B3, which deal with contracts of carriage and

insurance. These provisions have been moved from the more generic articles found in articles A10/B10 of

the Incoterms 2000 rules. The language in articles A3/B3 relating to insurance has also been altered

with a view to clarifying the parties obligations in this regard.

7. Security-related clearances and information required for such clearances

There is heightened concern nowadays about security in the movement of goods, requiring verification

that the goods do not pose a threat to life or property for reasons other than their inherent nature.

Therefore, the Incoterms 2010 rules have allocated obligations between the buyer and seller to obtain

or to render assistance in obtaining security-related clearances, such as chain-of-custody information, in

articles A2/B2 and A10/B10 of various Incoterms rules.

8. Terminal handling charges

Under Incoterms rules CPT, CIP, CFR, CIF, DAT, DAP, and DDP, the seller must make arrangements

for the carriage of the goods to the agreed destination. While the freight is paid by the seller, it is actually

paid for by the buyer as freight costs are normally included by the seller in the total selling price. The

carriage costs will sometimes include the costs of handling and moving the goods within port or container

terminal facilities and the carrier or terminal operator may well charge these costs to the buyer who

receives the goods. In these circumstances, the buyer will want to avoid paying for the same service

twice: once to the seller as part of the total selling price and once independently to the carrier or the

terminal operator. The Incoterms 2010 rules seek to avoid this happening by clearly allocating such

costs in articles A6/B6 of the relevant Incoterms rules.

9. String sales

In the sale of commodities, as opposed to the sale of manufactured goods, cargo is frequently sold

several times during transit down a string. When this happens, a seller in the middle of the string does

not ship the goods because these have already been shipped by the first seller in the string. The seller

in the middle of the string therefore performs its obligations towards its buyer not by shipping the goods,

but by procuring goods that have been shipped. For clarification purposes, Incoterms 2010 rules

include the obligation to procure goods shipped as an alternative to the obligation to ship goods in the

relevant Incoterms rules.

Incoterms

The Incoterms rules or International Commercial Terms

published by the International Chamber of Commerce

commercial transactions or procurement

contractual sales practices, the Incoterms rules are intended primarily to clearly commu

costs, and risks associated with the transportation

The Incoterms (Shipping) rules are accepted by gove

for the interpretation of most commonly used terms in in

remove altogether uncertainties arising from differ

such they are regularly incorporated into sal

First published in 1936, the Incoterms rules have b

Incoterms 2010[2]

'having been published on January 1, 2011. "Incoterm

the ICC.

Contents

!"#$

%&"

o %'()'*+,

o %-.)-+",

o %%-/0)-/0+,

o %1-/)-$/+

o %23.0)3"0+

o %43./)3"/+,

o %533/)3"3$/+,

1

o 1.6).6

o 178)8+,

o 1%-#)-+,

o 11-)-$9+

2.$

4/"$

o 43.)3"+",

o 43'6)3"'*6

International Commercial Terms are a series of pre-defined commercial terms

International Chamber of Commerce (ICC). They are widely used in International

procurement processes. A series of three-letter trade terms related to common

terms rules are intended primarily to clearly commu

costs, and risks associated with the transportation and delivery of goods.

The Incoterms (Shipping) rules are accepted by governments, legal authorities, and practitioners world

he interpretation of most commonly used terms in international trade. They are intended to reduce or

remove altogether uncertainties arising from different interpretation of the rules in different countr

such they are regularly incorporated into sales contracts[1]

worldwide.

First published in 1936, the Incoterms rules have been periodically updated, with the eighth version

having been published on January 1, 2011. "Incoterms" is a registered

!"#$

'*+,

-+",

-/0+,

-$/+,

0+,

3"/+,

3"3$/+,

.6+,

8+,

-+,

-$9+,

.$

3"+",

3"'*6

defined commercial terms

(ICC). They are widely used in International

letter trade terms related to common

terms rules are intended primarily to clearly communicate the tasks,

rnments, legal authorities, and practitioners worldwide

ternational trade. They are intended to reduce or

ent interpretation of the rules in different countries. As

een periodically updated, with the eighth version

s" is a registered trademark of

0+,

o 4%3':)3"'*:$+",

o 4133&)3"3$&+,

56

;#

FCA Free Carrier (named place of delivery)

The seller delivers the goods, cleared for export, at a named place. This can be to a carrier nominated by the

buyer, or to another party nominated by the buyer.

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 occurs at the seller's premises, the seller is responsible for

loading the goods on to the buyer's carrier. However, if delivery occurs at any other place, the seller is

deemed to have delivered the goods once their transport has arrived at the named place; the buyer is

responsible for both unloading the goods and loading them onto their own carrier.

CPT Carriage Paid To (named place of destination)

CPT replaces the venerable C&F (cost and freight) and CFR terms for all shipping modes outside of non-

containerised seafreight.

The seller pays for the carriage of the goods up to the named place of destination. Risk transfers to buyer

upon handing goods over to the first carrier at the place of shipment in the country of Export. The Shipper is

responsible for origin costs including export clearance and freight costs for carriage to named place (usually

a destination port or airport). The shipper is not responsible for delivery to the final destination (generally

the buyer's facilities), or for buying insurance. If the buyer does require the seller to obtain insurance, the

Incoterm CIP should be considered.

CIP Carriage and Insurance Paid to (named place of destination)

This term is broadly similar to the above CPT term, with the exception that the seller is required to obtain

insurance for the goods while in transit. CIP requires the seller to insure the goods for 110% of their value

under at least the minimum cover of the Institute Cargo Clauses of the Institute of London Underwriters

(which would be Institute Cargo Clauses (C)), or any similar set of clauses. The policy should be in the same

currency as the contract.

CIP can be used for all modes of transport, whereas the equivalent term CIF can only be used for non-

containerised seafreight.

DAT Delivered at Terminal (named terminal at port or place of destination)

This term means that the seller covers all the costs of transport (export fees, carriage, unloading from main

carrier at destination port and destination port charges) and assumes all risk until destination port or

terminal. The terminal can be a Port, Airport, or inland freight interchange. Import duty/taxes/customs costs

are to be borne by Buyer.

DAP Delivered at Place (named place of destination)

Can be used for any transport mode, or where there is more than one transport mode. The seller is

responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving

conveyance, at the named place. Duties are not paid by the seller under this term. The seller bears all risks

involved in bringing the goods to the named place.

DDP Delivered Duty Paid (named place of destination)

Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all

costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible

for unloading. This term is often used in place of the non-Incoterm "Free In Store (FIS)". This term places

the maximum obligations on the seller and minimum obligations on the buyer. With the delivery at the

named place of destination all the risks and responsibilities are transferred to the buyer and it is considered

that the seller has completed his obligations [5]

Incoterms applying only to sea and inland waterway transport

To determine if a location qualifies for these four rules, please refer to 'United Nations Code for Trade and

Transport Locations (UN/LOCODE)'. [6]

The four rules defined by Incoterms 2010 for international trade where transportation is entirely conducted

by water are as per the below. It is important to note that these terms are generally not suitable for shipments

in shipping containers; the point at which risk and responsibility for the goods passes is when the goods are

loaded on board the ship, and if the goods are sealed into a shipping container it is impossible to verify the

condition of the goods at this point.

Also of note is that the point at which risk passes under these terms has shifted from previous editions of

Incoterms, where the risk passed at the ship's rail.

FAS Free Alongside Ship (named port of shipment)

The seller delivers when the goods are placed alongside the buyer's vessel at the named port of shipment.

This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment.

The FAS term requires the seller to clear the goods for export, which is a reversal from previous Incoterms

versions that 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 be used only for sea or inland waterway transport [7]

FOB Free on Board (named port of shipment)

678+6,

FOB means that the seller pays for delivery of goods to the vessel including loading. The seller must also

arrange for export clearance. The buyer pays cost of marine freight transportation, bill of lading fees,

insurance, unloading and transportation cost from the arrival port to destination. The buyer arranges for the

vessel, and the shipper must load the goods onto the named vessel at the named port of shipment according

to the dates stipulated in the contract of sale as informed by the buyer. Risk passes from the seller to the

buyer when the goods are loaded aboard the vessel. This term has been greatly misused over the last three

decades ever since Incoterms 1980 explained that FCA should be used for container shipments.

CFR Cost and Freight (named port of destination)

The seller pays for the carriage of the goods up to the named port of destination. Risk transfers to buyer

when the goods have been loaded on board the ship in the country of Export. The Shipper is responsible for

origin costs including export clearance and freight costs for carriage to named port. The shipper is not

responsible for delivery to the final destination from the port (generally the buyer's facilities), or for buying

insurance. If the buyer does require the seller to obtain insurance, the Incoterm CIF should be considered.

CFR should only be used for non-containerized seafreight; for all other modes of transport it should be

replaced with CPT.

CIF Cost, Insurance & Freight (named port of destination)

This term is broadly similar to the above CFR term, with the exception that the seller is required to obtain

insurance for the goods while in transit to the named port of destination. CIF requires the seller to insure the

goods for 110% of their value under at least the minimum cover of the Institute Cargo Clauses of the

Institute of London Underwriters (which would be Institute Cargo Clauses (C)), or any similar set of clauses.

The policy should be in the same currency as the contract. CIF should only be used for non-containerized

seafreight; for all other modes of transport it should be replaced with CIP.

Allocations of costs to buyer/seller according to Incoterms 2010

'*

$

-

*

&

$

*

=

"

*

-

+6.

,

$

&

=

$

-

$

*

'( 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$

-. 6 6 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$

.6 6 6 6 8$ 8$ 8$ 8$ 8$ 8$ 8$ 8$

78 6 6 6 6 8$ 8$ 8$ 8$ 8$ 8$ 8$

-/0 6 6 6 6 6 8$ 68$6

6 8$ 8$

-#+-

,6 6 6 6 6 8$

8$6

8$ 8$ 8$ 8$

- 6 6 6 6 6 68$6

8$ 8$ 8$ 8$

-/ 6 6 6 6 6 6 68$6

6 8$ 8$

3.0 6 6 6 6 6 6 6 8$ 8$ 8$

3./ 6 6 6 6 6 6 6 6 6 8$ 8$

33/ 6 6 6 6 6 6 6 6 6 6 6

Previous terms from Incoterms 2000 eliminated from Incoterms

2010

DAF Delivered at Frontier (named place of delivery)

This term can be used when the goods are transported by rail and road. The seller pays for transportation to

the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for

transportation from the frontier to his factory. The passing of risk occurs at the frontier.

DES Delivered Ex Ship

Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named

port of destination and the goods made available for unloading to the buyer. The seller pays the same freight

and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed

to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for

unloading the goods and any duties, taxes, etc. are for the Buyer. A commonly used term in shipping bulk

commodities, such as coal, grain, dry chemicals; and where the seller either owns or has chartered, their own

vessel.

DEQ Delivered Ex Quay (named port of delivery)

This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port

of discharge.

DEQ doesn't exist anymore - it was deleted with the implementation of the ICC 2010.

DDU Delivered Duty Unpaid (named place of destination)

This term means that the seller delivers the goods to the buyer to the named place of destination in the

contract of sale. A transaction in international trade where the seller is responsible for making a safe delivery

of goods to a named destination, paying all transportation expenses but not the duty. The seller bears the

risks and costs associated with supplying the goods to the delivery location, where the buyer becomes

responsible for paying the duty and other customs clearing expenses.

See also

-

&--

&-"-6!

&-00=+&=7-73',

References

>--!$? >--#"@1 1

>? >--#"@1 1

>? >--#"@1 1

>$ >--#"@4

*AA$A"A$AA"A$A

$"

5 $B.6

External links

--A7

'*"?