2. International Commercial terms – INCOTERMS
First published in 1936 and amended in 1953, 1967, 1980, 1990
and 1999 and 2010. There were 13 INCOTERMS in INCOTERMS 2000
version.
Current Version is INCOTERMS 2020, revised in 2010, had been
effective from 1st January 2011.
As per ICC Rules, There are 11 INCOTERMS as per INCOTERMS
2020, which have been divided as 1st Class INCOTERMS and 2nd
Class INCOTERMS. ( Previous version 2000 had 13 INCOTERMS).
Two new INCOTERMS 2010 Rules – DAT and DAP replaced the
INCOTERM 2000 Rules DAF, DES. DEQ and DDU.
In 2020 DAT has been replaced by DPU.
3. When using FOB, CFR and CIF terms Risk passing point
from the seller to the buyer has been changed
(previously the ship rail as point of delivery has been
changed to “on Board” the vessel as the delivery point
in 2010 incoterms version. )
INCOTERMS Rules should be clearly mentioned and
inserted to the sales contract.
4. INCOTERMS DO NOT decide or deal with the following
very important points of a sales contract.
The Consequences of a breach of contact.
The payment methods.
Price to be paid for the goods.
Transfer of ownership of the goods.
Incoterms rules do not give a complete contract of sale.
5. Why INCOTERMS are important?
INCOTERMS decides which party should take the obligation to
organize the carriage or insurance and when seller delivers the
goods to the buyer.
Which party should bear the costs related to carriage and
customs expenses, packing, security related costs, some of
them are explained below.
INCOTERMS will specifically decides at which point the risk is
passed from the seller to the buyer.
Expenses at the Origin.
Origin THC.
6. Duty / Cess / Taxes at origin.
Duty / Cess / Taxes and other levies at the destination.
Customs clearance expenses for both origin and
destination.
Loading / stuffing at the origin.
Unloading / de stuffing at the destination.
Transport charges at origin.
Transport charges at the destination.
7. RULES FOR ANY MODE OR MODES OF TRANSPORT
( 1st Class Incoterms) - (7 Incoterms)
• 1st Class INCOTERMS could be used for any mode of transport.
• Could be used for Multi Modal Transport.
• EXW – EX WORKS
• FCA – FREE CARRIER
• CPT – CARRIAGE PAID TO
• CIP – CARRIAGE AND INSURANCE PAID TO
8. RULES FOR ANY MODE OR MODES OF
TRANSPORT ( 1st Class Incoterms)
• DPU – DELIVERED AT PLACE UNLOADED.
• DAP – DELIVERED AT PLACE
• DDP – DELIVERED DUTY PAID
9. RULES FOR SEA AND INLAND WATERWAY
TRANSPORT ( 2nd Class Incoterms)
• Point of Delivery from seller is a PORT.
• Point to which the cargo is carried for the buyer is also a PORT.
• FAS - FREE ALONGSIDE SHIP
• FOB – FREE ON BOARD
• CFR – COST AND FREIGHT - (Earlier – C&F in 2000)
• CIF – COST INSURANCE AND FREIGHT
11. EX WORKS
DELIVERY POINT
The seller delivers when it places the goods at the disposal of the buyer at the seller’s
premises.
RESPONSIBILITY AND CLEARANCE OF GOODS
The seller is not responsible to load the goods on any collecting vehicle or to clear the
goods for export. If the buyer wants the seller to load the goods the buyer should get the
sellers consent and seller should agree to load the shipment in advance. Otherwise the
seller can always refuse to load the shipment.
COSTS AND RISKS
The buyer bears all costs and risks involved in taking the goods from the agreed point.
13. FCA (FREE CARRIER)
DELIVERY POINT
The seller hand over the goods to the carrier or another person nominated by the buyer at the
seller’s premises or another named place. Must be very careful when using this term and the
address should be specifically mentioned if the cargo is handed over at a particular point.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export and load the shipment to the first carrier
or keep the shipment ready for unloading at a named placed the buyer has nominated.
COSTS AND RISKS
The risk passes to the buyer from seller at the point of exchange.
14. The most important point is that the seller and buyer
should agree the place the seller is going to hand over.
The address should be clearly mentioned.
For Example: FCA, No 100, FTZ, Katunayake. Sri Lanka,
Incoterms 2010.
Should not mention as FCA Katunayake which is not
giving a clear picture of the specific location and will lead
to confusion and disputes.
16. CPT (CARRIAGE PAID TO)
DELIVERY POINT
The seller delivers the goods to the carrier or another person nominated by the seller
at an agreed place.
RESPONSIBILITY AND CLEARANCE OF GOODS
Seller fulfils its obligation to deliver when it hands the goods over to the carrier and
not when the goods reach the place of destination.
COSTS AND RISKS
Seller pays the carriage relevant freight charges to send the goods to the named
place of destination.
18. DELIVERY POINT
The seller delivers the goods to the carrier or another person nominated by the seller at an
agreed place.
RESPONSIBILITY AND CLEARANCE OF GOODS
Seller fulfils its obligation to deliver when it hands the goods over to the carrier and not
when the goods reach the place of destination.
COSTS AND RISKS
Seller must contract for and pay the costs of carriage necessary to bring the goods to the
named place of destination
INSURANCE
• The seller also contracts for insurance cover against the buyer’s risk of loss of or damage
to the goods during the carriage.
CIP (CARRIAGE AND INSURANCE PAID TO)
20. DELIVERY POINT
The seller delivers when the goods, once unloaded from the arriving means of transport,
are placed at the disposal of the buyer at a named terminal at the named port or place of
destination.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export but has no obligation to clear the goods
for import.
DAT (DELIVERED AT TERMINAL) in 2010
Replaced by DPU in 2020.
21. DELIVERY POINT
The seller delivers when the goods, once unloaded from the arriving means of transport,
are placed at the disposal of the buyer at a named terminal at the named port or place of
destination.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export but has no obligation to clear the goods
for import.
The seller should make sure that cargo is unloaded at the named place of destination.
The seller is not liable for any demurrages, If there are delays due to the consignees’
inability provide customs cleared import documents.
DAT has been replaced by DPU in 2020
incoterms. (Delivered at Place Unloaded).
22. Exchange Point (Buyer’s Nominated Place)
Seller’s Risk
DAP (DELIVERED AT PLACE)
MODE OF TRANSPORT : ANY MODE
23. DAP (DELIVERED AT PLACE)
DELIVERY POINT
The seller delivers when the goods are placed at the disposal of the buyer on the
arriving means of transport ready for unloading at the named place of destination.
COSTS AND RISKS
The seller bears all risks involved in bringing the goods to the named place of
destination.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export but has no obligation to clear the
goods for import. Also note that if the seller incurs additional costs for unloading at
the place of destination the seller cannot recover same from the buyer if the buyer
has not agreed in advance.
24. Exchange Point – Buyers Nominated Place
Seller’s Risk
DDP (DELIVERY DUTY PAID)
MODE OF TRANSPORT : ANY MODE
25. DDP (DELIVERY DUTY PAID)
DELIVERY POINT
The seller delivers when the goods are placed at the disposal of the buyer on the arriving
means of transport ready for unloading at the named place of destination.
COSTS AND RISKS
The seller bears all the costs and risks involved in bringing the goods to the named place of
destination.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export and import. Also note that if the seller
incurs additional costs for unloading at the place of destination the seller cannot recover costs
from the buyer if the buyer has not agreed in advance.
27. FAS (FREE ALONGSIDE SHIP)
DELIVERY POINT
The seller delivers when the goods are placed alongside the vessel at the named
port of shipment.
COSTS AND RISKS
The seller bears all the costs and risks involved in bringing the goods alongside
the ship.
29. FOB (FREE ON BOARD)
DELIVERY POINT
The seller delivers the goods on board the vessel nominated by the buyer at the
named port if shipment or procures the goods already so delivered.
RESPONSIBILITY AND CLEARANCE OF GOODS
It requires the seller to clear the goods for export but has no obligation to clear the
goods for import.
31. CFR (COST AND FREIGHT)- (C&F )
DELIVERY POINT
The seller delivers the goods on board the vessel or procures already so delivered.
COSTS AND RISKS
The seller must pay the costs in bringing the goods to the load port. Risk pass to the
buyer as soon as the cargo is on board at the origin port.
RESPONSIBILITY AND CLEARANCE OF GOODS
The seller is required to clear the goods for export.
33. CIF (COST INSURANCE AND FREIGHT)
DELIVERY POINT
The seller delivers the goods on board the vessel or procures already so delivered.
COSTS AND RISKS
The seller enters into a contract with the carrier and pay the costs and freight to send the
goods to the named port of destination. Risk passes to the buyer as soon as the cargo is on
board at the port of origin.
INSURANCE
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the
goods during the carriage.
34. Incoterms and freight charges
appearing on Bills of lading and HAWBs.
When we issue Bills of lading and HAWBs for carriage of goods from one point
to another point, the B/Ls or HAWBs should be issued clearly mentioning who
should pay the Freight charges.
When shipments are handled on Ex Works / FCA / FOB /FAS the bills of
ladings / HAWBs will be issued as “FREIGHT COLLECT”
The buyer will have to pay the freight and other additional charges (if
applicable at the destination.
When shipments are handled on DAP/DPU/DDP/CPT/CIP/CFR/CIF the bills of
lading or HAWBs are issued as “FREIGHT PREPAID.”
The shipper should pay the freight charges and other required charges at the
origin.
