INCOTERMS 2010

The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law.

INCOTERMS are the terms which buyer and seller both agree to before shipping the goods. They state which task, risk and cost shall be associated with the buyer and the seller. They also define the risk shall be transferred from the seller to the buyer in an international trade transaction.

Since there are many stages in transportation of goods from one place to another such as packing, transportation to dock in seller’s country, custom duties, freight charges, custom duties at buyer’s country, collection of goods, handling charges, insurance, etc. INCOTERMS help in defining up to which state the seller shall be liable and his liability shall be transferred to buyer at which stage.

There are 11 INCOTERMS

EXW – it stands for ex work. this is INCCOTERM under which the seller has the least liability. Seller is only liable until the goods are in his warehouse all the other formalities shall be fulfilled by the buyer and all the costs with respect to transportation shall be borne by buyer.

FCA – Is stands for free carrier. Under this the seller shall be responsible for paying charges up to the port in his country and after that liability shall be shifted to the buyer.

CPT – it stands for carriage paid to. Under this the seller is liable to pay for all the expenses related to transportation up to the port of buyer but is not liable for the safety of goods ie all the insurance related liability is on the buyer.

CIP – it stands for Carriage and Insurance paid to. Under this the seller pays all the expenses with respect to transportation and insurance. But if any claim arises under insurance then it shall be liability of the buyer to fulfil all the formalities with respect to insurance.

DAT – it stands for Delivered at Terminal. Under this the seller shall be liable to pay transportation cost as well as be liable for safety of goods till reaching the port in buyer’s country.

DAP – it stands for Delivered at place. Under this Seller bears cost, risk and responsibility for goods until made available to buyer at named place of destination. Seller clears goods for export, not import

DDP – it stands for Delivered Duty Paid. Seller is liable to make the goods reach at named destination along with all export and import clearances, duties and taxes. The buyer shall be liable for unloading.

FAS – it stands for free alongside ship. Seller is only liable until the goods reach the dock but not on the ship for freight. As soon as it reaches dock after all clearances the risk shall transfer to the buyer.

FOB- it stands for Free On Board. It’s a stage ahead of FAS. The buyer shall be liable till the goods are on board ie on ship for freight and as soon as they are on board the risk will transfer to the buyer.

CFR – it stands for Cost and Freight. Seller is liable to pay up to freight and after that liability shifts to buyer as soon as it reaches buyer’s port.

CIF – it stands for Cost Insurance and Freight. Under this seller bears the cost of freight and insurance cost up to the destination (buyer’s port). Buyer is liable to pay all the unloading cost at his/her port.

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