Definitions of terms 2020
Group E – Direct delivery to departure
Ex Works (named place) → 'in factory (named place)'.
The seller makes merchandise available to the buyer in its own facilities: factory, warehouse, etc. All expenses from that moment on are the responsibility of the buyer.
Ex Works means that the seller is only responsible for delivering the goods to its own or external facilities designated by it. The buyer assumes all risk from there to destination. Under Ex Works conditions, the seller makes the merchandise available to the buyer at its own premises but has no obligation to load the merchandise on the vehicle that comes to pick up the merchandise, nor will it dispatch the merchandise for export. The incoterm® EXW rule means the minimum obligation for the seller.
Group F – Indirect delivery, without payment for main transport
Free Alongside Ship (named loading port) → ‘Free alongside ship (named loading port)’.
The seller delivers the merchandise to the agreed dock of the agreed loading port; that is, next to the ship. The FAS incoterms rule is specific to bulk cargo or voluminous cargo because they are deposited in specialized port terminals, which are located on the dock. It does not contemplate other modes of transport other than maritime or river transport.
The seller is responsible for the procedures and costs of export customs.
Type of cargo: bulk cargo or bulky cargo.
Free On Board (named loading port) → 'Free on board (named loading port)'.
The seller delivers the merchandise on the ship. The buyer is responsible for designating and booking the main transportation (vessel).[7].
The FOB is one of the most used rules in international trade. It must be used for general cargo (drums, coils, containers, etc.) of goods, not usable for bulk. Its appearance is prior to the creation of the International Chamber of Commerce, since there is already evidence of its use in the British Courts, in 1812.
The Incoterms FOB rule is used exclusively for transport by ship, whether sea or river.
A very common mistake in the sector is to refer to the term FOB to budget for air shipments. Since FOB is an incoterm expressly for non-containerized maritime shipments, it could not be used, given that it is NOT a versatile incoterm. The correct incoterm for this type of operations must be FCA and its variants.
Free Carrier (named place) → 'Free carrier (named place)'.
The seller undertakes to deliver the merchandise to an agreed point within the country of origin, which may be the premises of a freight forwarder, a railway station... (this agreed place to deliver the merchandise is usually related to the carrier's spaces). It bears the costs until the merchandise is located at that agreed point.
The Incoterms FCA rule can be used with any type of transport: air, rail, road and container/multimodal transport. However, it is a rule not widely used to replace FOB.[8].
Group C – Indirect delivery, with payment of main transport
Cost and Freight (named destination port) → 'cost and freight (named destination port)'.
The seller is responsible for all costs, including main transportation, until the goods reach the port of destination. However, the risk is transferred to the buyer at the time the merchandise is loaded on the ship, in the country of origin. It should be used for general cargo, which is transported in containers; It is NOT appropriate for bulk.
The Incoterms CFR rule is only used for transport by ship, whether sea or river.
Cost, Insurance and Freight (named destination port) → 'cost, insurance and freight (named destination port)'.
The seller is responsible for all costs, including main transportation and insurance, until the goods reach the port of destination. Although the insurance has been contracted by the seller, the beneficiary of the insurance is the buyer. The insurance must contain clauses similar to the ICC-C of the IUA.
As in the previous rule, CFR, the risk is transferred to the buyer from the moment the merchandise is loaded on the vessel, in the country of origin. The CIF incoterm is one of the most used in international trade because the conditions of a CIF price are those that mark the customs value of a product that is imported.[9] It should be used for general or conventional cargo.
The CIF incoterm is exclusive to the maritime environment.
Carriage Paid To (named place of destination) → 'transportation paid to (named place of destination)'.
The seller is responsible for all costs, including main transport, until the goods reach the agreed point in the destination country. However, the risk is transferred to the buyer upon delivery of the goods to the carrier within the country of origin. If several carriers are used to reach the destination, the risk passes when the merchandise has been delivered to the first.
The Incoterms CPT rule can be used with any mode of transport including multimodal transport (combination of different types of transport to reach the destination).
Carriage and Insurance Paid (To) (named place of destination) → 'transportation and insurance paid to (named place of destination)'.
The seller is responsible for all costs, including main transport and insurance, until the goods reach the agreed point in the destination country. Although the insurance has been contracted by the seller, the beneficiary of the insurance is the buyer.
The Incoterms CIP rule can be used with any mode of transport or with a combination of them (modal transport). The 2020 version includes a modification to this standard compared to 2010 and it recommends that the insurance clauses be equivalent to the ICC-A clauses of the IUA.
Group D – Direct delivery on arrival
Delivered at place unloaded (place) → 'delivered at place and unloaded (place)'.
It replaces the DAT (Delivered at Terminal) rule that appeared in the 2010 version. It is a multimodal rule. It assumes that the seller delivers the merchandise to the place designated by the buyer, including unloading. It can be discharged at port or at a destination. However, the buyer must be responsible for the import clearance.
Delivered At Place (named destination place) → 'delivered at a point (named destination place)'.
The Incoterms DAP rule is used for all types of transport. It replaced the DAF, DDU and DES Incoterms in the 2010 edition.
The seller is responsible for all costs, including main transport and insurance (which is not mandatory), but not the costs associated with importation, until the goods are made available to the buyer in a vehicle ready for unloading. He also assumes the risks until that moment. Import clearance is assumed by the buyer. If it does not ship on time, it may cause costs at the terminal.
Delivered Duty Paid (named destination place) → 'delivered duty paid (named destination place)'.
The seller pays all expenses until the merchandise is delivered to the agreed point in the destination country. The buyer does not carry out any type of procedure. Import customs costs are assumed by the seller. The type of transport is multipurpose/multimodal.