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Shipping Incoterms

Shipping Incoterms

1: EXW – Ex Works Access to goods must be given to the buyer from the seller at a determined location. After that, all costs and risks are then the responsibility of the buyer for the entire shipping process.

2: FCA – Free Carrier The goods must be made available at the seller’s own risk and expense at their own premise or a predetermined place. The seller then bears responsibility for the clearance of the goods for export. However, it can be agreed that the buyer must instruct the carrier to transfer a “Bill of Lading (BL)” with a note on board to the seller.

3: CPT – Carriage Paid To For the seller, CPT has the same responsibilities as FCA, but they must also pay the delivery costs.

4: CIP – Carriage Insurance Paid To The seller has the same obligations as CPT, but the seller is also obliged to pay the insurance with a high coverage ratio. Parties can agree separately to apply limited coverage.

5: DAP – Delivered At Place The costs and risks are the seller’s responsibility during the transport of the goods to the predetermined address. Once the goods arrive at this address and they are ready for unloading, the risk then passes to the buyer.

6: DPU – Delivered at Place Unloaded The costs and risks of delivering goods to an agreed destination where the goods can be unloaded for further transport are the responsibility of the seller. The seller also arranges customs and unloads the goods at the agreed place. Then the buyer arranges the customs clearance and any associated rights.

7: DDP – Delivered Duty Paid The seller must pay the costs and is responsible for the risks of transport. They also carry out the export and import responsibilities and pay any import duties. The risk then passes to the buyer as soon as the goods have arrived at the address and are ready for unloading.

8: CFR – Cost And Freight CFR is the same for the seller and buyer as FOB. However, the seller needs to also pay for the transport of the goods to the port.

9: CIF – Cost, Insurance, and Freight The seller has the same obligations as with CFR but also pays the (minimum) insurance costs. The buyer must pay for more comprehensive insurance.

Here is an overview of the obligations for both the buyer and seller.

This table clearly shows which party has the responsibilities and obligations for different tasks in the shipping process. For example, insurance, transportation and export duties.

What Incoterms Do Not Cover

As noted above, Incoterms are generally incorporated in the contract of sale, however, they do not:

  • • address all the conditions of the sale.
  • • identify the goods being sold nor list the contract price.
  • • reference the method of payment negotiated between the seller or buyer.
  • • when title, or ownership of the goods, passes from the seller to the buyer.
  • • specify which documents must be provided by the seller to the buyer to facilitate the customs clearance process at the buyer’s country.
  • • address liability for the failure to provide the goods in conformity with the contract of sale, delayed delivery, nor dispute resolution mechanisms.

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