Incoterms

The Seller is responsible for making the goods available at their premises and the buyer is responsible for uploading them. Often when making an initial quotation for the sale of goods without any costs included, the Ex Works term is used. EXW denotes that:

• The cost of goods sold transfers from the seller to the buyer.
• The buyer bears all the risks involved in bringing the goods to their final destination.
• The seller is not responsible for loading the goods on collecting vehicles. The buyer arranges the pickup of the freight from the supplier’s designated ship to the site and owns the in-transit freight.
• The supplier is responsible for completing all the export documentation but the seller does not clear them for export. This responsibility is incurred by the buyer, who is responsible for clearing the goods through Customs.
• If parties wish that the task of loading the goods on departure must be handled by the seller, he does so at the buyer’s risk and cost, unless written otherwise explicitly in the contract of sale.

The Ex Work term liberates the seller from responsibilities and obligations, it places the minimum obligations on the seller and maximum obligations on the buyer.

The seller is responsibility for delivering the shipment to the carrier or the carrier’s designated representative at the seller’s location or another agreed destination.

This term is used for all kind of shipments.

FAS denotes that it is the responsibility of the seller to place goods rightfully. The goods must be placed alongside the ship by the seller.

According to Incoterms 2010, ICC publication 715, this term is applicable for maritime and inland waterway transport only but the limitation is that it does not apply to multimodal sea transport in containers. Incoterms 1980 explained that FCA should be used for container shipment but over the last three decades, this term has been extensively misused ever since.

It denotes that :

• The seller bears the cost of the transportation of goods to the port of shipment and loading cost.
• The seller must provide instructions to the buyer regarding the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder.
• Cost and risk are divided when the goods are actually on board the vessel.

The risk is transferred when the goods are in the buyer’s account.  As the buyer did not pay for the goods in the country of origin, he is responsible for:

• Clearing the goods for export.
• Arranging for the vessel.
• Paying the cost of marine freight transportation and insurance.
• Pays for unloading and transportation costs from the arrival port to the destination.
• Clear advance government tax in the country of origin as a commitment to loading the goods on board a vessel designated by the buyer.

 The shipper is responsible to load the goods and the named vessel at the named port of shipment with the dates stipulated in the contract of sale as informed by the buyer.

Incoterms 2020 for international trade has outlined four rules for a trade where transportation is entirely conducted by water. To determine if a location qualifies for these four rules, please refer to the ‘United Nations Code for Trade and Transport Locations (UN/LOCODE)’. These rules are explained below:

This term is used for all kinds of shipments and it denotes that the seller incurs the expenses for the carriage and the risks associated with delivering goods to a carrier. Upon handing goods over to the first carrier at the place of shipment in the country of Export, the risk shifts to the buyer.

The buyer is solely responsible for arranging:

• Carrier payment of freight for same Export clearance in Exporting country.
• Carrier payment of freight for Import clearance in the Importing country.
• Buying and paying expenses of Insurance.

This method was formerly referred to as CNF (C&F, or C+F). In this method, the expenses of the costs and freight to bring the goods to the port of destination are incurred by the seller. Once the goods are loaded on the vessel, the risk is transferred to the buyer. Insurance for the goods is NOT included.

CIP is used for Air Mode & CIF is used for Sea Mode and istThe containerized transport/multimodal equivalent of CIF. The seller bears the cost of carriage and insurance to the named destination point. When the goods are handed over to the first carrier the risk passes to the buyer. 

It is a method of exporting goods same as CFR where the seller pays expenses until the product is completely loaded on a ship. The only difference from CFR is that the seller must in addition procure and pay for the insurance.

This term denotes that until after the goods are unloaded at the terminal the seller incurs all risk ) and covers all the costs of transport (export fees, carriage, insurance, and destination port charges. The buyer covers the cost of transporting the goods from the terminal (any place, whether covered or not, such as a quay, warehouse, container yard or road, rail, or air cargo terminal) or port to the final destination and pays the import duty/taxes/customs costs.

DAP can be applied to any transport mode, even where there is more than one transport mode. Basically, it dictates that the seller is obligated to arrange the carriage. The seller is also responsible for delivering the goods, ready for unloading from the arriving conveyance, at the named place. An important difference from Delivered At Terminal DAT, where the seller is responsible for unloading, under DAP seller is not responsible for paying duties. 

This term places the maximum obligations on the seller and minimum obligations on the buyer and is often used interchangeably with the non-Incoterm “Free In Store (FIS)”. It is a method of transporting goods where the seller is responsible for the transportation of goods and the cost of transporting goods to the named place in the country of the buyer including customs clearance expenses such as import duties and taxes. The responsibility for unloading does not lie with the seller.