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Explanation Incoterms and certificates

The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commercial transactions or procurement processes and their use is encouraged by trade councils, courts and international lawyers. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods. Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer, but they do not themselves conclude a contract, determine the price payable, currency or credit terms, govern contract law or define where title to goods transfers.

The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from the differing interpretations of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide.

The different kind of incoterms for all modes of transport

EXW : Ex Works ( … named place of delivery )  The Seller’s only responsibility is to make the goods available at the Seller’s premises. The Buyer bears full costs and risks of loading and moving the goods from there to destination, including arranging for the export clearance. It is not recommended for international moves

FCA : Free Carrier ( … named place of delivery ) Delivery is made either when goods are (1) loaded on the means of transport provided by the buyer at the seller’s stated location; or (2) when placed at the disposal of the buyer’s carrier, cleared for export by the seller. From either point of delivery, the Buyer bears the costs and risks of moving the goods to destination. The named place/address is required when FCA is used.

CPT : Carriage Paid To ( … named place of delivery ) The Seller delivers and transfers risk of loss or damage by handing over goods to the carrier chosen by the seller, cleared for export, who pays for moving the goods to the named place of destination. From the time the goods are transfered to the first carrier, the Buyer bears the risks of loss or damage.

CIP : Carriage and Insurance Paid to ( … named place of destination ) The Seller delivers and transfers risk of loss or damage by handing over goods to the carrier chosen by the seller, cleared for export, who pays for moving the goods to the named place of destination. From the time the goods are transferred to the first carrier, the Buyer bears the risks of loss or damage. The Seller, however, purchases cargo insurance thru to the named place of destination.

DPU : Delivered at named Place Unloaded ( named address / place of destination ) The Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer’s disposal at a place of destination. The Seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination. DPU is the only Incoterms where the Seller must pay for unloading at destination. As seller is responsible for unloading the goods at destination it is highly recommended to be as specific as possible as to the named address/place of destination as all costs thru to unloading are for the selller’s account.

DAP : Delivered At Place ( named address / place of destination ) The Seller delivers when the goods are placed at the Buyer’s disposal on the arriving means of transport ready for unloading at the named place of destination or at the agreed point within that place, if any such point is agreed. The Seller bears all risks involved in bringing the goods to the named place. Delivery & Arrival at destination are the same.

The different kind of incoterms for Ocean freight only

FAS : Free Alongside Ship ( … named seaport ) The Seller delivers the goods to the buyer when the goods are cleared for export then placed alongside the ship nominated by the buyer at the named port of shipment. From that point, the Buyer bears all costs and risks of loss or damage.

FOB : Free On Board ( … named seaport of shipment ) The Seller delivers the goods to the buyer on board the vessel nominated by the buyer, cleared for export, at the named wharf/seaport of shipment. From that point, the Buyer bears all costs and risks of loss or damage.

CFR : Cost and Freight ( … named port of destination ) The Seller delivers the goods to the buyer on board the vessel, cleared for export to the named port of destination. The Buyer bears all risks of loss or damage once on board. Where more than one mode of transport is to be used, such as when goods are handed over to a carrier at a container terminal, it is highly recommended to use CPT instead.

CIF : Cost, Insurance and Freight ( … named port of destination ) The Seller delivers the goods to the buyer on board the vessel, cleared for export to the named port of destination. The Buyer bears all risks of loss or damage once on board. The Seller, however, purchases the cargo insurance to the named wharf/seaport of destination. Where more than one mode of transport is to be used, such as when goods are handed over to a carrier at a container terminal, it is highly recommended to use CPT instead.