Download this scheme in good quality with a brief description of the terms.
Incoterms (International Commerce Terms) provide a set of rules for an
unambiguous interpretation of the conditions for transferring responsibility
during the process of goods delivery from vendors to buyers in foreign trade.
1. Expenses of the parties for delivery; the moment to which the cost of
transportation is carried by the vendor and after which by the buyer.
2. The point of transition of the risks associated with delivery from the
vendor to the recipient.
3. Date of transfer of the goods at the disposal of the buyer or the transport
company authorized by the latter.
Incoterms do not define:
1. The transfer of title.
2. The consequences of default.
The terms for Incoterms 2000
EXW: The entire delivery cycle is carried out by the buyer or his trusted
transport company. The contract specifies the seller’s warehouse where the
buyer or the transport company representing the latter takes the goods, the
buyer pays the export duties;
FCA: The shipment is delivered to the buyer’s carrier to the terminal of
departure specified in the contract; the seller pays the export duties;
CPT: The seller pays the main carrier for the delivery to the arrival terminal
specified in the contract. Insurance is at the expense of the buyer, customs
clearanceand delivery from the arrival terminal is at the expense of thebuyer;
CIP: Similar to CPT, only the main carriage’s insurance is at the seller’s
DAF: Used in cases of rail or road transportation. The supplier delivers the
goods to the border and pays the fees. The buyer (or authorized carrier)
pays customs clearance of the goods.
DES: The vendor bears all costs and risks of delivering the goods to the
specified port of destination until the moment of unloading. Responsibility is
transferred on board the vessel at the port agreed in the contract. The
transported goods undergo customs clearance at the expense of the buyer;
DEQ: Just as in the previous paragraph, only the destination is the pier.
DDU: The supplier delivers the goods to the specified location in the buyer's
country. All risks and costs of delivery, as well as responsibility for damage
or loss of cargo, are carried by the seller;
DDP: Full delivery of goods to the customer (to the place specified in the
contract). All duties, fees and taxes are paid by the seller.
Rules applicable only to marine transportation:
FOB: The vendor delivers the cargo to the specified port and loads it on the
ship. All shipping and handling charges are carried by the seller. Risks of
damage to the goods pass from the vendor to the buyer at the time the
goods arrive on board the ship.
FAS: the vendor arranges the delivery of the goods to the port specified in
the contract and provides it for loading. All risks related to spoilt or damaged
goods are transferred from the vendor to the buyer (or its authorized
transportation company) at the time of delivery to the pier.
CFR: Delivery by the vendor to the specified port of destination in the
contract. Shipping and freight of the vessel, customs clearance (for export)
is paid by the vendor. Insurance is paid by the buyer. Risks of damage or
loss of cargo, as well as additional expenses, are transferred to the buyer at
the time the cargo passes through the ship's rail.
CIF: The same as CFR, but the vendor insures the main transport.
Examples of application of Incoterms
Incoterms are used in documents relating to international transport. These
can be contracts, invoices and others.
For example, below there are two invoice samples in which Incoterms EXW
and CPT are indicated. (Click on image to enlarge)
In the first example, the EXW condition is specified. This means that the
buyer takes the goods from the vendor at the latter’s warehouse. The buyer
arranges and pays for shipping entirely at his own expense. In the second
example, there are CPT condition. This means that the vendor arranges
delivery to the specified place, the cost of the carrier’s services is also
included in the price of the goods.