Incoterms
Seller-buyer responsibility matrix
In the latest definition set (Incoterms® 2020) there are 4 terms exclusively for transport over water and 7 which can be used for any mode of transport including multimodal. The definitions provided here are based on the official text issued by the ICC. Please take into consideration that the Incoterms® 2020 are not always used in accordance with the official rules attached to them. Deviations in the use could potentially lead to a higher risk for either party most common uses of each term. Pay close attention to the location listed for each term, as this indicates where risk and obligations change from Seller to Buyer. To avoid different interpretations of the named place, be as precise as possible for example by using the zip/postal code and street number.
Rules for any mode including MultiModal transport.
EXW (Ex Works) – (factory, mill, warehouse: sellers door) Risk passes to buyer including payment for loading and all transportation from the seller’s door. Seller has no obligation to arrange for export clearance however if applicable it is strongly advised to do so anyway.
FCA (Free Carrier) – (Named Place) Seller loads the goods, if needed cleared for export, on the buyers collecting vehicle. Risk passes to buyer as well do transportation costs from the moment of receiving the goods.
CPT (Carriage Paid To) – (named destination place-includes unloading at destination) Risk passes to buyer when delivered to carrier
CIP (Carriage and Insurance Paid To) – (place same as CPT, but includes insurance) Seller has the obligation to arrange for and pay all costs and the insurance covering the transport and safe arrival the named destination (not unloaded). Be aware: the risk passes at loading in the main transport!
DPU (Delivered at Place Unloaded) – (Named place – unloaded) Risk and costs pass to buyer when seller delivers and unloads the goods in good condition at the named place of destination.
DDP (Delivered Duty Paid) – (Named Place – not unloaded) Risk passes to buyer when seller delivers goods to named destination point cleared for import. Take care as seller with this Incoterm because also the import clearance and payment of all levies and taxes due are for account of the seller. These might be incorporated in the in selling price or as a service. Taxes like VAT are not recoverable and are due again with the buyer once the goods are registered as an asset in their books. So in the end the Tax authorities receive the amount of VAT twice. If DDP is deemed necessary is advised to investigate if VAT should be excluded.
DAP (Delivered at Place) – (named Place – not unloaded) Risk and Costs pass to buyer upon safe arrival at the named place of destination.
Rules for Sea and inland waterway transport
FAS (Free Alongside Ship) – (named port, ready for direct loading onto the ship) Risk passes to buyer including payment of all transportation costs once delivered alongside ship by the seller. Typically used for sea or inland waterway transportation for delivery to a seagoing vessel.
FOB (Free On Board) –(named port) Risk pass to buyer including payment of all transportation once safely delivered on board the ship.
CFR (Cost and Freight) – (destination port-not unloaded) Risk passes at origin port! Obligations regarding cost pass to buyer upon safe arrival of the ship to the named port at destination.
CIF (Cost, Insurance and Freight) – (destination port-not unloaded) Seller has the obligation to arrange for and pay all costs and the insurance covering the sea transport and safe arrival in the port of destination (moored). Be aware: the risk passes at origin port!
Customs clearance and insurance
All Incoterms® 2020 except EXW require the seller to clear the goods for export where applicable.
Arranging for transport insurance is, unless otherwise indicated or agreed to, not part of the Incoterms® 2020. Because a transport insurance is in most cases an obligation anyway it is recommended to at least discuss the topic when agreeing to the sale/purchase. It is wise to consider arranging for the insurance for the part where the risk is yours according to the Incoterms® 2020 used.