INCOTERMS What is this?
The international sales transactions can be conflictive if the rules of the goods transport are not been well applied from origin to destination.
To avoid disappointments, the International Chamber of Commerce in 1936 established a protocol code that has since governed the foreign trade contracts.
The 13 most relevant incoterms are taken on review:
These are the most important:
EXW: It field is filled in the factory. It Indicates when the sale occurs at the output, in their own warehouses, verified and packaged goods as instructed by the buyer. The exporter must provide only the commercial invoice. It affects all types of transport (road, rail, sea or air).
FCA: Free Carrier. Sell on departure and all transportation. In this case, the exporter delivers the goods to the shipper by the buyer and prepares customs formalities. As documents, the seller delivers the commercial invoice, the document proving delivery to the carrier and the SAD (Single Administrative Document EU customs).
FAS: Free Alongside Ship (named port of shipment). The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but not for multimodal sea transport incontainers. This term is typically used for heavy-lift or bulk cargo.
FOB: Free on Board (named port of shipment). The seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!). The seller must clear the goods for export. The term is applicable for maritime and inland waterway
transport only but not for multimodal sea transport in containers . The buyer must instruct the seller 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. This term has been greatly misused over the last three decades ever since
Incoterms 1980 explained that FCA should be used for container shipments.
CFR: Cost and Freight (named port of destination). Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel (this rule is new!). Maritime transport only and Insurance for the goods is not included. This term is formerly known as CNF (C&F).
CPT: Carriage Paid To (named place of destination). The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier.
For any transport and sale at the outlet, the exporter is responsible for customs clearance and paying a carrier transporting the goods to the named point and inform the buyer of the date of departure and arrival of the goods at destination.
CIF: Cost, Insurance and Freight (named port of destination). For shipping and selling out, the seller handles the export, delivers the goods on board the ship, and pays the freight to the port of discharge destination, and the insurance policy that covers at least 110% the amount specified in the purchase.
CIP: Carriage and Insurance Paid to (named place of destination). For any type of transportation and sale at the outlet, the seller is responsible for export formalities and hire an insurance policy and a carrier transporting the goods to the destination point.
DAF: Delivered At Frontier (named place of delivery). For rail and road transport or sale in the destine, the seller is responsible for export formalities and hire a carrier who deliver the goods to the agreed border point.