Incoterms 2010

New Incoterms 2010 rules were adopted from 1st January 2011.

In below table one can find the full list of terms (Incoterms 2010) with essential comments.

Category

Abbr.

Means of transport

Definition

Category Е
Dispatch

EXW

any

EX WORKS ( ... named place)
Франко завод ( ...название места)

Category F Main delivery was not paid by the seller

FCA

sea and inland waters freights

"Free Carrier (...named place)
Франко перевозчик (...название места)"

FAS

sea and inland waters freights

Free Alongside Ship (... named port of shipment)
Франко вдоль борта судна (... название порта отгрузки)

FOB

sea and inland waters freights

Free On Board (... named port of shipment)
Франко борт (... название порта отгрузки)

Category С Main delivery was paid by the seller

CFR

any

Cost and Freight (... named port of destination)
Стоимость и фрахт (... название порта назначения)

CIF

any

Cost, Insurance and Freight (... named port of destination)
Стоимость, страхование и фрахт (...название порта назначения)

CIP

any

Carriage and Insurance Paid Тo (... named place of destination)
Фрахт/перевозка и страхование оплачены до (...название места назначения)

CPT

any

Carriage Paid To (... named place of destination)
Фрахт/перевозка оплачены до (...название места назначения)

Category D Delivery

DAT

any

NEW!
Delivered At Terminal (... named terminal of destination)
Поставка на терминале (... название терминала)

DAP

any

NEW!
Delivered At Piont (... named point of destination)
Поставка в пункте (... название пункта)

DDP

any

Delivered Duty Paid (... named place of destination)
Поставка с оплатой пошлины (... название места назначения)

DDU

any

Excluded from Incoterms 2010
Delivered Duty Unpaid (... named place of destination)
Поставка без оплаты пошлины (... название места назначения)

DAF

any

Excluded from Incoterms 2010
Delivered At Frontier (... named place)
Поставка до границы (... название места поставки)

DEQ

any

Excluded from Incoterms 2010
Delivered Ex Quay (... named port of destination)
Поставка с пристани (... название порта назначения)

DES

any

Excluded from Incoterms 2010 Delivered Ex Ship (... named port of destination)
Поставка с судна (... название порта назначения)

How to use Incoterms® 2010 rules?

1. By inserting Incoterms® 2010 into your supply contract

Upon your wish in your contract Incoterms® 2010 have to be indicated in the following content: «[term chosen, exact address, according to] Incoterms® 2010».

2. By choosing corresponding Incoterms’ term

Chosen Incoterms’ term has to be corresponded to the goods, way of their transportation and, besides, reflects all obligations of the parties and the moment until which they plan to fulfill them. For example, obligations of the seller or buyer concerning delivery or insurance. Explanations to each term contain information which is useful for making the choice. Whatever term would be chosen, the parties should consider that rules of the ports and other points could influence on interpretation of the contract.

3. By more precise definition of point or port

Chosen Incoterms’ term could work only if the parties defined the point and port or even better more precise place described. The good example of such description could be: «FCA 38 Cours Albert 1er, Paris, France Incoterms® 2010». Regarding Incoterms - Ex Works (EXW), Free Carrier (FCA), Delivered At Terminal (DAT), Delivered At Place (DAP), Delivered Duty Paid (DDP), Free Alongside Ship (FAS) and Free On Board (FOB), named point should be the place where the delivery takes place and risks transfers to the buyer. According to Incoterms Carriage Paid To (CPT), Carriage And Insurance Paid To (CIP), Cost And Freight (CFR) and Cost, Insurance and Freight (CIF), named point differs from the place of delivery. According to these four terms Incoterms named place means the place of destination, to which the carrier is paid to. To escape doubts or argues naming place should be more precise with full address at this appointed point or place of destination.

4. Ones should mind that Incoterms by itself is not the full supply contract itself.

Incoterms rules only shows which of the parties of the supply contract should fulfill actions necessary for delivery and insurance, when the seller sells the goods to the buyer and which types of charges each of the parties bears. Incoterms rules do not indicate on the price or type of payment under the contract. They do not regulate transfer of property right of the goods or impacts of contract’s violation. These questions normally are defined in clearly indicated conditions in the contract or in the right that could be used for this contract. Besides, the parties should mind that mandatory local law could be used preferentially for any aspects of the contract, including chosen Incoterms’ term.

Main features of Incoterms 2010

1. Two new Incoterms’ terms – DAT (delivery at terminal) and DAP (delivery at place) – substituted the following Incoterms’ terms in previous version of 2000: DAF (Delivered At Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivery Duty unpaid).

The number of Incoterms’ terms was decreased from 13 to 11. This was done by including two new terms that could be used not depending on the agreed means of transport for delivery, to be more specific: DAT (Delivery At Terminal) and DAP (Delivery At Place) instead of terms of Incoterms 2000 DAF (Delivered At Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay) and DDU (Delivery Duty Unpaid). According to two new terms mentioned above the delivery is fulfilled at agreed place of destination: in term DAT (Delivery At Terminal) by providing the buyer with the goods not unloaded from the transport vehicle in which they arrived (as it was before in the term DEQ (Delivered Ex Quay); in term DAP (Delivery At Place) also by providing the buyer with the goods but ready for unloaded (as it was before according to DAF terms (Delivered At Frontier), DES (Delivered Ex Ship) and DDU (Delivery Duty Unpaid). New terms indicated pulled down Incoterms 2000 terms: DES (Delivered Ex Ship) and DEQ (Delivered Ex Quay). Indicated terminal in term DAT (Delivery At Terminal) could be in port and that is why it is called “terminal”- DAT can be used with no in those cases where DEQ (Delivered Ex Quay) was used Incoterms 2000. The same is with arrived “transport facility” at terminal DAP (Delivery At Place) could be done by vessel and the agreed place of destination – port of destination, so DAP (Delivery At Place) could be easily used in those cases when DES (Delivered Ex Ship) was used Incoterms 2000.

Mentioned above rules as well as their predecessors are the terms of “arrival” when the seller bears all charges (except for import customs clearance if it’s applicable) and risks connected with delivery of the goods to the point of destination.

2. Classification of 11 terms of Incoterms 2010

Eleven terms of Incoterms 2010 could be divided into 2 separate groups:

Rules for any means of transport

EXW

Ex Works

Франко завод

FCA

Free Carrier

Франко перевозчик

CPT

Carriage Paid to

Перевозка оплачена до

CIP

Carriage and Insurance Paid to

Перевозка и страхование оплачены до

DAT

Delivered at Terminal

Поставка на терминале

DAP

Delivered at Place

Поставка в месте назначения

DDP

Delivered Duty Paid

Поставка с оплатой пошлин

Rules for sea and inland waters freights

FAS

Free Alongside Ship

Cвободно вдоль борта судна

FOB

Free on Board

Свободно на борту

CFR

Cost and Freight

Стоимость и фрахт

CIF

Cost Insurance and Freight

Стоимость, страхование и фрахт

The first group consists of 7 terms which could be used independently from selected way of delivery and not depending on one or several means of transport are used. The following terms refer to this group EXW (ExWorks), FCA (Free Carrier), CPT (Carriage Paid to), CIP (Carriage and Insurance Paid to), DAT (Delivered at Terminal), DAP (Delivered at Place) и DDP (Delivered Duty Paid). They could be used even if the sea freight is absent. Also it is important to remember that these terms could be used when partially the vessel is used for a part of transportation.

In the second group of Incoterms 2010 terms both point of destination and places where the goods are delivered to are ports. That is why the group is named as “sea and inland waters freights”. In this group you can find the following terms: FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight) и CIF (Cost Insurance and Freight). In last three terms any kind of the ship’s rail indication is absent and the goods are considered as delivered only when it is places “on vessel’s board” . This reflects more modern and up-to-date commercial reality and excludes any idea about the risk transferring to and fro relatively to imagined perpendicular line.

3. The rules for inland and international trade

Incoterms were traditionally used in international supply contracts when the cargoes were crossing the border. In different parts of the world creation of trade marks unions, as for example in European Union they made less important the control for the goods during their border crossing of corresponding countries.

That is why in subtitles of Incoterms 2010 in some forms it is mentioned that the rules could be used in international supply contracts as well as in internal contracts. As a result Incoterms rules in several points emphasize that obligations for fulfillment of export-import formalities are applicable only when used.

Two cases persuaded the Internationa Chamber of Commerce (ICC) in duly movements in this direction. First of all business men widely use Incoterms rules in inland contracts. On the other side in USA there is a growing intention to use Incoterms in internal trade instead of terms of dispatch and delivery priory fixed in Unified Trade Code of USA.

4. Explanations

Before each term of Incoterm 2010 you will find explanations. They distinguish main moments for each term of Incoterms: when they have to be used, when risk is transferred, which way the costs are divided between seller and buyer. These explanation are not the part of actual Incoterms 2010 rules, its goal is to help the user accurately and efficiently of correspondent international trade term for each particular bargain.

5. Electronic communication

Previous versions of Incoterms rules gave lists of documents which were substituted by electronic messages - Electronic data interchange (EDI) messages. In articles A1/B1 Incoterms 2010 commit the fact of electronic exchange as well as hard (paper) messages if it is accepted by both parties. This formula makes easier the evolutuion for the new electronic procedures in period of usage of Incoterms 2010.

6. Insurance coverage

Incoterms 2010 rules present the first version of Incoterms from the moment of revision of the London Insurer Rules (from the Cargo Clauses Institute) and take into account these change of Rules. In Incoterms 2010 information concerning insurance obligations is in articles A3/B3, where transportation and insurance agreements. These regulations were transferred from articles А10/B10 of Incoterms 2000, which had similar contents. The formulation of articles А3/B3 concerning insurance are also added with aim to clarify the obligations in this point.

7. Control of security and information required for that

At present the concern regarding security of goods moving that requires checking products for not harmful for human life or their property due to the reasons not connected with its natural qualities. That is why in articles А2/B2 and А10/ B10 of Incoterms 2010 the obligations are split between the seller and the buyer as for the fulfillment of the formalities and making assistance, connected with security control, such as Сhain of custody information.

8. Charges for terminal handling

According to Incoterms CPT, CIP, CFR, CIF, DAT, DAP and DDP the seller is obliged to make all necessary actions for the providing of delivery of the goods to the agreed destination point.

When the freight is paid by the seller, in fact the costs are paid by the buyer because the freight expenses are already included into the price of goods. Sometimes expenses for the delivery includes the charges for handling and moving of the goods in the port or at container terminal and the carrier and terminal’s operator could put this part of payment to the buyer of the goods. During these circumstances the buyer is interested in escaping double payment for one and the same service – one time to the seller as a part of total value of the goods and second time seperately to the carrier or terminal’s operator. Incoterms 2010 succeed to escape it by clear splitting these expenses in the articles А6/B6 of the corresponding terms.

9. Further sellings

In trading of rough goods in comparison with ready-made goods, often the cargo is sold several times during transit. If it’s convenient, the seller in the middle of the chain «does not execute the shipmenty of the goods», because the goods are already shipped by the first seller in the chain. That is why the seller in the middle of the chain fulfills its obligations before the buyer, making not the shipment of the goods itself, but providing the shipped goods. For clarifications in some Incoterms 2010 the obligation for “providing the shipped goods” is included as alternative to the obligations for the shipment of the goods in proper Incoterms.

Changes brought into Incoterms

Sometimes parties are willing to add something into some Incoterms’ rule. Incoterms 2010 does not object against such addition, hence there is a risk regarding this. For escaping unwanted surprises it make sense to predict more precisely the expected effect from these additions by the parties. For example, if in the contract there is a definition of sharing expenses in comparison with Incoterms 2010, the parties should clearly define if they intend to change the clause where the risk transfers from the seller to the buyer.

Explanations of the used Incoterms 2010

As in Incoterms 2000, obligations of the seller and the buyer are mirror reflected: obligations of the buyer are in column А, obligations of the buyer – are in column B. These obligations could be used by the seller or the buyer or sometimes in accordance with the terms of the contract according to applicable law, through intermediary agents such as carriers or other persons, named by the Seller or the Buyer with a definite aim.

Incoterms 2010’ text by itself is self-sufficient. But for users’ convenience you can find below definitions of the names used in the text.

Carrier – for aims of Incoterms 2010 the carrier is a party with which the carrier agreement is conducted.

Customs formalities – the demands that have to be fulfilled in accordance with applicable customs regulation and could include obligations for the documents, security of information or factual inspection of the cargo.

Delivery – this definition is wide in its sense in trade law and in practice, but Incoterms 2010 is using it for definition when risk of loose or damage of the goods transfers from the Seller to the Buyer.

Shipping documents – this definition is used at the header of the clause А8. It means the document that confirms the delivery (handling) of the goods. In many terms of Incoterms По 2010 – the shipping document is a transport document or corresponding electronic record. Hence, in EXW, FCA, FAS and FOB terms the shipping document could be a receipt. Shipping document could have other functions, as example, to be a part of mechanism of payment.

Electronic record or procedure – set of information consisting of one or several electronic messages, and when it is applicable, fulfils the same function as hard copy of document.

Packaging – this definition is used for several aims:

  1. Packaging of the goods should correspond to the requirements of sale and purchase agreement.
  2. Packaging of the goods means that the goods are ready to be transported.
  3. Storage of packed goods in the container or in other transport.

In Incoterms 2010 the packaging includes first and second meaning mentioned above. Incoterms 2010 does not regulate the obligations of the parties for the laying of the goods into the container and moreover if needed the parties have to be foreseen in the sale and purchase agreement.

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