Discover here everything you need to know about Incoterms®, a codified set of contractual provisions related to the transport of goods in international trade.
A contraction of the English « International Commercial Terms », Incoterms®:
determine the reciprocal obligations of the seller and the buyer within the framework of an international purchase/sale contract;
specify respective responsibilities but do not define when ownership is transferred;
establish the sharing of costs and the division of risks;
are one of the elements that determine the Customs valueThe customs value is the value assigned to imported goods, w… (cf. Customs Library, “Customs value”).
What are the 11 Incoterms® 2020?
7 Multimodal Incoterms®
EXW – FCA – CPT – CIP – DAP – DPU – DDP / Applicable to any mode of transport
4 Maritime Incoterms®
FAS – FOB – CFR – CIF / Applicable to sea and inland waterway transport
7 Multimodal Incoterms®
EXW – FCA – CPT – CIP – DAP – DPU – DDP / Applicable to any mode of transport
4 Maritime Incoterms®
FAS – FOB – CFR – CIF / Applicable to sea and inland waterway transport
How does Incoterms® codification work?
The Incoterms® 2020 codification consists of 4 alphanumeric characters, including 3 letters representing the Incoterm® chosen in the contract and 1 digit (1, 2 or 3) localizing the transport contract according to the following provisions:
Location in France;
Location in another European Union Member State;
Location outside the European Union.
Incoterms® are divided into 4 groups, each beginning with the letter C, D, E or F, reflecting at different levels the degree of responsibility (from minimal to maximal) incumbent on one or other of the stakeholders in the exchange (buyer or seller, as the case may be) at the various stages of goods transport.
The use of Incoterms® is not mandatory but highly recommended in international trade.
These international trade rules are applicable to any mode of transport.
EXW
The seller fulfills his obligation to deliver when the goods are made available at his premises (workshop, factory, warehouse, etc.). The buyer bears all costs and risks inherent in transporting the goods from the seller’s premises to the desired destination. The seller is not required to load the goods onto any collecting vehicle. This term represents the seller’s minimum obligation. To be used primarily in domestic trade.
FCA
The seller fulfills his obligation to deliver when he has handed over the goods, cleared for export, to the carrier nominated by the buyer at the agreed point. The buyer chooses the mode of transport and the carrier. The buyer pays the main carriage. The transfer of costs and risks occurs when the carrier takes charge of the goods. The “Bill of Lading on board” option allows the buyer and seller to agree that the seller may obtain the bill of lading.
CPT
The seller chooses the mode of transport and pays the freight for the carriage of the goods to the agreed destination. He clears the goods for export. When the goods are handed over to the main carrier, the risks are transferred from the seller to the buyer.
CIP
The seller has the same obligations as in CPT, but must also provide all-risk insurance. The seller clears the goods for export.
DAP
The seller must deliver the goods by placing them at the disposal of the buyer on the arriving means of transport, ready for unloading at the agreed place, if specified, at the agreed destination on or within the agreed date or period. The seller assumes the risks associated with transporting the goods to the place of destination.
DPU
The seller has fulfilled his obligations when the goods are placed at the buyer’s disposal, unloaded from the means of transport at the agreed place of destination (this place may be a terminal, a warehouse, or the buyer’s premises).
DDP
Conversely to the EXW ex-works term, this term designates the seller’s maximum obligation. The seller does everything, including import Customs clearance and payment of applicable duties and taxes. The transfer of costs and risks occurs upon delivery to the buyer. Unloading is at the buyer’s cost and risk.
4 Maritime Incoterms®
These rules are specifically applicable to sea and inland waterway transport.
FAS
The seller fulfills his obligation to deliver when the goods have been placed alongside the vessel, on the quay at the agreed port of shipment. The buyer must bear all costs and risks of loss of or damage to the goods. The FAS term requires the seller to clear the goods for export.
FOB
The seller fulfills his obligation to deliver when the goods are placed on board the vessel at the named port of shipment. The seller clears the goods for export. The buyer chooses the vessel and pays the sea freight. The transfer of risks occurs when the goods are on board the vessel. From this moment, the buyer must bear all costs.
CFR
The seller must choose the vessel and pay the costs and freight necessary to bring the goods to the named port of destination. Export formalities are the responsibility of the seller. The transfer of risks occurs when the goods are placed on board the vessel.
CIF
The seller has the same obligations as in CFR but must also provide minimum marine insurance. Export formalities are the responsibility of the seller. The goods travel, on sea or inland waterway transport, at the buyer’s risk. The transfer of risks occurs when the goods are placed on board the vessel.
Departure/Arrival: An Essential Distinction in Incoterms®
Departure Sales (DS)
8 Incoterms® cover main carriage, with goods traveling at the buyer’s risk.
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