2020-08-05
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EXW = EX Works (... named place)
All modes of transport
The seller's only responsibility is to put the merchandise at the buyer's disposal, on its premises. The seller is not responsible for loading the goods on the vehicle produced by the buyer, except by a different agreement.
Remember that in Europe, practice dictates that in an EXW purchase, the goods were loaded by the seller. However it is nothing more than a practice, nothing forces the seller to do so! If you specialise in major exportation outside the EU, be prepared for unwelcome surprises! If the parties wish to assign the responsibility and risks and costs of this operation to the seller, they should add an precise clause with regard to the Incoterm in the sale contract (e.g. EXW Brussels loaded ICC 2000 Incoterm).
The risk transfer takes place at the moment the goods are made available to the buyer. The buyer bears all risks and costs inherent to the transport of the goods, from that point to the destination. This term represents the seller's minimum obligation! This Incoterm puts outwards clearance procedures at the buyer's expense. However, it can be difficult for the buyer himself to set these formalities in motion, in the departure country. This preparation, for the buyer, can be a great deal more complicated than in the case of the Incoterms which do not include such an obligation! If the buyer is not in a position where he can directly or indirectly complete the customs clearance formalities, he should systematically opt for the FCA Incoterm over the EXW.
FCA = Free Carrier (... named place)
All modes of transport
It is the buyer who chooses the method of transport and the carrier, and who pays for them. The seller fulfils his obligations when he hands the goods over to the carrier designated by the buyer, at the location agreed on in the Incoterm. The transfer of costs and risks becomes effective from the moment the carrier takes over the merchandise.
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If the agreed place is the seller's premises, the delivery is done when the goods are loaded on the vehicle of the carrier named by the buyer.
- If the agreed place isn't the seller's premises, the delivery is done when the goods are made available to the carrier named by the buyer on the loaded vehicle.
The seller is responsible, at his own cost and risk, of providing the buyer with all the necessary documentation for exportation (licences, customs formalities,...).
FAS = Free Alongside Ship (... named port of shipment)
Exclusively by sea or by inland waterway
According to this term, the seller's obligations are fulfilled when the goods are placed alongside the ship, on the quay or on barges. The seller produces the merchandise along with the invoice and the documents specified in the contract, and cleared for export (Contrary to the 1990 Incoterms!). The costs and risks are transferred from seller to buyer upon delivery. This means that the buyer must cover the costs and risks of loss or damage to the goods. It is the buyer who designates the ship and pays for maritime freight.
FOB = Free On Board (... named port of shipment)
Exclusively by sea or by inland waterway
The merchandise must be placed aboard the ship by the seller at the designated port of shipment. It is the buyer who chooses the ship and pays for the freight. The risk and expenses transfer between the seller and buyer is done when the merchandise passes the ship's rail. Export formalities are the seller's responsibility.
CFR = Cost and Freight (... named port of destination)
Exclusively by sea or by inland waterway - for multimodal transport, the CPT Incoterm is preferable
It is the seller who chooses the ship and pays for marine freight up to the agreed port and who does the loading and obtains the outwards customs clearance. The risks of loss or damage to the goods, as well as any further costs are transferred to the buyer when the merchandise passes the ship's rail at the port. The point where the risk transfer takes place is thus the same as with FOB.
CIF = Cost, Insurance and Freight (... named port of destination)
Exclusively by sea or by inland waterway - for multimodal transport, the CIP Incoterm should be selected
The seller chooses the ship, pays for freight until the agreed port and provides marine insurance against loss or damage to the goods during transit. The insurance policy or any other proof of guarantee drawn up with an insurer will be transmitted to the party designated in the contract. It is the seller who pays the premium, but the goods travel at the buyer's risk. The place of risk transfer is the ship's rail at the port. Loading the ship and the outwards customs clearance are at the seller's expense.
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The seller underwrites a transport insurance policy on the buyer's behalf. But the latter often is unaware of the conditions, the level of value, the journey and with whom the insurance has been taken out! In addition, does the insured value include an expected profit, the entry fees, the possible unloading and the forwarding costs? Does the insurance cover the goods until the unloading port's depot or until the final destination? The buyer must therefore consult the seller to check all the insurance conditions.
CPT = Carriage Paid to (... named place of destination)
All methods of transport including multimodal transport
The seller chooses the carrier and pays for freight up to the agreed destination. The buyer will pay for transport insurance. The loss or damages risk is transferred to the buyer from the passing of the goods to the carrier. If successive carriers are used: the risk is transferred on passing to the first carrier. The merchandise will be cleared outwards by the seller.
CIP = Carriage and Insurance Paid to (... named place of destination)
All methods of transport, including multimodal transport
The seller selects a carrier and pays the freight for transport of the goods until an agreed destination. It is the buyer who will pay for the transport insurance. The risk of loss or damage to the merchandise is transferred to the buyer from the moment it is passed to the carrier. If successive carriers are used: the risk is transferred from receipt by the first carrier. The goods will be cleared through customs outwards by the seller. The seller must additionally produce transport insurance against the risk of spoilage or loss of the goods during transit. This policy must be underwritten so that the buyer or any other party interested in the goods, must be able to send their claim directly to the insurer. The insurance policy or any other proof of guarantee drawn up with an insurance company will be passed to the party named in the contract.
The seller underwrites a transport insurance policy on the buyer's behalf. But the latter is often unaware of the conditions, the value insured, the journey and with whom the insurance has been taken out! In addition, does the insured value include an expected profit, entry fees, the possible unloading and the forwarding costs? Does the insurance cover the goods until the unloading port's depot or until the final destination? The buyer must therefore consult the seller to know all the insurance conditions.
Incoterms of sale at destination free the seller of his obligations only on arrival at destination, leaving him with the costs and risks linked to transport. The seller discharges the buyer from a whole series of obligations and risks (which can be a sales dispute). Additionally, it is sometimes preferable to remain in charge of your goods' transportation until delivery, for example in a case where you have an agreement with a carrier. Yet, the negative consequence of these Incoterms is that the time of delivery and so, often of payment, is postponed until the arrival of the goods at destination.
Group D (Delivered) is made of the following Incoterms: DES; DEQ; DDU; DDP.
DES = Delivered Ex Ship (... named port of destination)
Sea, inland waterway or multimodal transport
The seller selects the ship, pays for freight and insurance, and bears the risk of marine transport, but is not obliged to insure the goods. The transfer of costs and risk is done aboard the ship at the agreed port's usual unloading spot.
DEQ = Delivered Ex Quay (Duty paid) (... named port of destination)
Sea, inland waterway or multimodal transport
This term means that the transfer of risk and costs takes place when the seller puts the goods, at the buyer's disposal (Major alteration with respect to the 1990 Incoterms!) on the quay of the agreed destination port, but they have not been cleared through customs. The seller must withstand all the risks inherent to the forwarding including unloading at destination, but is not obliged to insure the merchandise.
DDU = Delivered Duty Unpaid (... named place of destination)
All methods of transport
The seller has fulfilled his part of the agreement when the goods are put at the buyer's disposal in the agreed location in the importing country without being unloaded. The seller will be responsible for costs and risk of forwarding the goods (without being obliged to insure the merchandise) up until this location, except for any import formalities, duties, taxes or other official charges arising from import.
DDP = Delivered Duty Paid (... named place of destination)
All methods of transport
The seller is in charge of all the operations linked to carriage (insurance, transport, customs formalities and forwarding to destination) until delivery to the buyer. The transfer of risk and costs commences from delivery to the buyer. Unless expressed otherwise, unloading at the destination is at the buyer's cost. If the parties wish to diminish the sellers obligations, such as the payment of certain expenses due to importation, they will have to specify it. e.g.: DDP, VAT unpaid.
This term represents the seller's maximal obligation.
This incoterm puts importing formalities and corresponding taxes in the seller's name. It must not be used if the seller is uncertain as to whether he is able to easily clear the goods inwards and obtain an importing licence.
The DAF Incoterm (DAF) = Delivered at Frontier (... named place)
All methods of transport, on condition that there is a land border
The seller has fulfilled his obligations when the goods have been cleared outwards through customs and are delivered to the agreed location on the border. It is therefore important to specify the aforementioned border and designate a point of forwarding. Both costs and risk associated with transport are born by the seller, yet he does not have to insure the goods. Unless mentioned otherwise in the contract, the goods are delivered without being unloaded by the seller.
