Contractual terms developed by the International Chamber of Commerce (ICC) in Paris

23/04/22 Prepared by Leng kimhok 1

　　 Contractual terms developed by the International 　　　　 Chamber of Commerce (ICC) in Paris

　　 A standard three-letter abbreviated terminology

　　 Translated into various languages

　　 Covers thirteen main options

　　 The purpose is to clearly describe the key obligations of sellers, buyers and carriers with regard to:

　　 Chapter　6: 　　 INCOTERMS

Delivery　of　the　Goods

Transfer　of　Risks

Transfer　of　Costs

Incoterms


Incoterms: There are 4 groups• The E group:

– The carriage is arranged by the buyer– Risks & costs are transferred to the buyer when the goods are made

available • The F group:

– The carriage is arranged by the buyer– Risks & costs are transferred to the buyer as from just after export

clearance• The C group:

– The carriage is arranged by the seller– Risks are transferred to the buyer just after export clearance but costs

are on the seller up to import clearance at named destination• The D group:

– The carriage is arranged by the seller– Risks are transferred just before import clearance but costs are on the

seller up to import clearance when duty is unpaid or including import clearance when duty is paid.

3

Incoterms – Point of delivery of the goods and transfer of risk

E EXW Ex worksUpon delivery of goods at the seller’s premises

(named place)

FCA Free carrier Upon delivery of goods to the carrier(named place)

FAS Free alongside ship

Upon delivery of goods alongside ship (namedport of shipment)

F

FOB Free on board When the goods pass the ship’s rail at the namedport of shipment

CFR Cost and freight When the goods pass the ship’s rail at the port ofshipment

CIF Cost, insurance andfreight When the goods pass the ship’s rail at the port of

shipment

CPT Carriage paid to

Upon delivery of goods to the carrier(named place)

C

CIPCarriage and insurance paid to

Upon delivery of goods to the carrier(named place)


DAF Delivered at frontier

Upon delivery of goods at frontier (named place)- not unloaded

DES Delivered ex ship

When goods are placed at the disposal of thebuyer on board the ship (named port of

destination)

DEQ Delivered ex quay

When goods are placed at the disposal of thebuyer at the quay (named port of destination)

DDU Delivered duty unpaid

Upon delivery of goods (at named place ofdestination) not cleared for import and not

unloaded

D

DDP Delivered duty paid

Upon delivery of goods cleared for import (atnamed place of destination), duty paid but not

unloadedCustomsDouane

Incoterms – Point of delivery of the goods and transfer of risk


IncotermLoading on truck (carrier)

Export-Customs declaratio

n

Carriage to port of

export

Unloading of truck in port of

export

Loading charges in

port of export

Carriage to port of

import

Unloading charges in port of

import

Loading on truck in port of

import

Carriage to place

of destinatio

n

InsuranceImport

customs clearance

Import taxes

EXW Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer N/A Buyer Buyer

FCA Seller Seller Seller Buyer Buyer Buyer Buyer Buyer Buyer N/A Buyer Buyer

FAS Seller Seller Seller Seller Buyer Buyer Buyer Buyer Buyer N/A Buyer Buyer

FOB Seller Seller Seller Seller Seller Buyer Buyer Buyer Buyer N/A Buyer Buyer

CFR Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer N/A Buyer Buyer

CIF Seller Seller Seller Seller Seller Seller Buyer Buyer Buyer Seller Buyer Buyer

DAT Seller Seller Seller Seller Seller Seller Seller Buyer Buyer N/A Buyer Buyer

DAP Seller Seller Seller Seller Seller Seller Seller Seller Seller N/A Buyer Buyer

CPT Seller Seller Seller Seller Seller Seller Seller Seller Seller N/A Buyer Buyer

CIP Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer

DDP Seller Seller Seller Seller Seller Seller Seller Seller Seller N/A Seller Seller

Duties of buyer/seller according to Incoterms 2010


• EXW (+ name of place): – “Work” means factory, or the seller’s place of business.

– The seller to make the goods available to the buyer at the seller’s place of business or some other named place, as specified after the “EXW”.

– Ex: the contract may say “EXW Battambang,” which would mean the seller’s place of business in Battambang.

• It is good for seller, because: – The buyer is responsible for arranging transportation from the

seller’s place of business or other named place, export and import clearance.

– The buyer bears all the costs of

transporting, and the ROL or

damage to them following delivery.




• DDP (+ named place of destination): Delivered Duty Paid– Ex: “DDP Shanghai,” which

would mean that a foreign seller

agreed to arrange for delivery of

the goods to Shanghai, China.

• It is good for buyer, because: – The seller agrees to arrange for delivery of the goods to a

named place in a foreign nation, which may be many kilometers inland, including arranging import clearance into the foreign country.

– The seller bears all the costs of transporting the goods and the risk of loss or damage to the goods up until the time they are delivered to the named place in the foreign nation.




• Most of the contracts for the international sale of goods use the terms beginning with “F” or “C” under which neither party has so many duties. Two of the most common and important terms used in international sales contracts are FOB and CIF.

• FOB (+ named port of shipment) = FOB (+ name of vessel) in U.S, Free on Board.

• It means:– The seller delivers when the goods pass the ship’s rail at the named port of shipment. – The buyer has to bear all costs and ROL or damage to the goods from that point. – The FOB term requires the seller to clear the goods for export.

Ex: “Seller to supply 1,000 cartons of ping pong balls FOB Kompongsom (INCOTERMS 2000)@ US$ 1.50 per carton.”



• CIF (+ named port of destination): Cost, Insurance and Freight– Ex: “ Seller to supply three bulldozers CIF Kompongsom

(INCOTERMS 2000)• It means:

– The seller to pay for carriage and insurance from her place of business to the port of destination.

– The seller must also obtain export clearance.– These costs into the total price of the goods under the contract.– The buyer is responsible for all costs after the goods have been transported to the named port of destination.– The ROL or damage to the goods passes from the seller to

the buyer when the goods pass over the ship’s rail at the port of shipment



• FCA (+ name of place): Free Carrier– The seller is responsible for delivering the goods,

cleared for export, to a named carrier at the place specified after the FCA term in the K.

– The buyer is then responsible for the cost of carriage, insurance, and any import clearances or import duties required to get the

goods into the buyer’s nation.– The ROL passes from the

seller to the buyer when the

goods are delivered to the carrier.



• FAS (+ named port of shipment): Free Alongside Ship• Under an FAS contract:

– The seller is obliged to deliver the goods alongside a ship at the named port of shipment (the goods are delivered to the dock, or to a warehouse at the dock).

– The seller is responsible for export clearance of the goods.

– The buyer is responsible for the cost of transport of the goods from alongside the ship at the port of shipment to the final destination of the goods.



• CFR (+ named port of destination): Cost and Freight– It is similar to the CIF term discussed above, but it differs in

that:• The seller is not obliged to insure the goods being carried.

– As with a CIF contract: • the seller must clear the goods for export & pay for the cost of the

transportation to the named port of destination.

– ROL or damage to the goods passes from the seller to the buyer when the goods cross the ship’s rail at the port of shipment.



• CPT (+ named place of destination): Carriage Paid To– It is similar to the CIF and CFR terms.

– The main difference is that• the ROL or damage to the goods

passes when the seller delivers the

goods to the first carrier.

• This first carrier could be a trucking company in the seller’s nation that takes the goods from the seller at his place of business.

• Then the containers are transported to ports, where they are loaded or driven onto ships.

• After the sea journey, the containers are unloaded & often transported to a freight depot inland in the buyer’s nation.

• Although delivery occurs when the goods are delivered to the first carrier, the seller must still pay the cost of carriage to the named place of destination, which may be inland in the buyer’s nation.

• The seller must obtain export clearance from her nation.

DELIVERY



• CIP (+ named place of destination): Carriage and Insurance Paid– The same as the CPT term, except that the seller

must pay for the cost of carriage and insurance to the named place of destination. The insurance for the time after delivery is made out in favor of the buyer. The seller need not pay for insurance past the point where she delivers the goods to the first carrier.

DELIVERY



• DAF (+ named place): Delivered At Frontier– Contracts involving cross-border road or rail transport.

– The seller must pay the transport costs to the named frontier, which may be at the border of the seller’s own nation.

– Delivery occurs when the

goods are placed at the

buyer’s disposal at the frontier.

– The seller must clear the goods

for export from the nation in

which delivery occurs.

– The ROL passes at delivery, and the buyer is then responsible for the cost of onward transportation of the goods, and for any import clearances that are required.

Customs Douane


• DES (+ named port of destination): Delivered Ex-Ship – The seller is responsible for transport costs to the named port

of destination.

– The seller bears the ROL or damage to the goods until the goods are placed at the buyer’s disposal on board the ship at this port, at which point delivery occurs. Therefore, the seller should insure the goods to this point.

– The buyer is then responsible for the costs of removing the goods from the ship and transporting them elsewhere, and for obtaining import clearance.


• DEQ (+ named port of destination): Delivered Ex-Quay – The seller must pay for the transport costs to the wharf at this

port, including the costs of unloading the goods from the ship onto the quay. Delivery occurs when the goods are placed at the buyer’s disposal on the quay,

– So the seller bears the ROL or damage to the goods up to that point and should insure the goods up to that point.

– The DEQ term is similar to DES, except that with DEQ delivery occurs on the wharf (rather than on the ship) at the port of destination.

– The buyer must obtain

import clearance.

• DAT - DELIVERED AT TERMINAL (... named terminal at port or 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 named terminal at the named port or place of destination.

• DAP - DELIVERED AT PLACE (... named 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 names place of destination. The Seller bears all risks involved in bringing the goods to the named place.




• DDU (+ named place of destination): Delivered Duty Unpaid to the named final point of destination. (This might be the buyer’s place of business, a freight depot in the buyer’s nation, or some other place specified in the sales contract. )– The seller is responsible for the cost of carriage of the goods

to the named point, bears the ROL until the goods are delivered to that place.

– The buyer is responsible for import clearance.

– The DDU term is very similar

to the DDP term discussed above,

except that with DDP the seller

must obtain import clearance.




CustomsDouane

Over　the　ship’s　rail:　FOB,　CFR　&　CIF

Point of delivery & transfer of risk for maritime “F” and “C” terms

Alongside　the　ship:　FAS

PORT　OF　ORIGIN


Point of delivery & transfer of risk for “D” terms (except DAF)

CustomsDouane

On　board　the　ship:　DES

Unloaded　from　the　ship:　DEQ(*)

Delivered　at　destination　point:　DDU(*)　&　

DDP

(*)　Pending　customs　clearance　

PORT　OF　DESTINATION

23/04/22 37

DELIVERY　and　TRANSFER　OF　RISK　can　take　place　at　many　points　between　the　seller’s　premises　and　the　

buyer’s　premises

BuyerSeller

EXW FCA

CPT

CIP

FOB

CFR

CIF

FAS DES DEQ DDUDDP

Waterborne　transport　only

DAF

Transport　by　land

Cus-toms

Cus-toms

Cus-toms

Cus-toms

38

TRANSFER　OF　COSTS　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　takes　place　at　points　that　are　sometimes　

different

BuyerSeller

EXW FCA

CPT

CIP

FOBFAS DES DEQ DDUDDP

Waterborne　transport　only

DAF

CFR

CIF

Import　clearance　costs　on　account　of　the　buyer

Export　clearance　costs　on　account　of　the　seller

Transport　insurance　costs　on　account　of　the　seller

Unloading　costs　on　account　of　the　seller　only　if　in　its　contract　of　carriage

Transport　by　land

Cus-toms

Cus-toms

Cus-toms

Cus-toms

**

*

Documents

Contractual terms developed by the International Chamber of Commerce (ICC) in Paris