Incoterms and Trade Info

WHAT ARE INCOTERMS
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​Incoterms (International Commercial Terms) are a set of standardized rules that define the responsibilities of buyers and sellers in international trade. They clarify who is responsible for shipping, insurance, customs duties, and other costs, as well as when the risk of the goods transfers from the seller to the buyer. Published by the International Chamber of Commerce (ICC), Incoterms help prevent misunderstandings and disputes by ensuring everyone involved in a trade deal knows their obligations. They are commonly used in contracts to streamline global trade.

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Incoterms Rules for Any Mode of Transport:​

1. EXW – Ex Works
2. FCA – Free Carrier
3. CPT – Carriage Paid To
4. CIP – Carriage and Paid To
5. DAP – Delivered at Place
6. DPU – Delivered at Place Unloaded (replaces DAT)
7. DDP – Delivered Duty Paid

Incoterms for Sea and Inland Waterway Transport

EXW – Ex-Works  or Ex-Warehouse

• Ex works is when the seller places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.).
• The seller does not need to load the goods on any collecting vehicle. Nor does it need to clear them for export, where such clearance is applicable.

FCA – Free Carrier

• The seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.
• The parties are well advised to specify as explicitly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
• 2020 Update: Allows for the issuance of a Bill of Lading with an onboard notation.​

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CPT  – Carriage Paid To

• The seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such site is agreed between parties).
• The seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

CIP – Carriage And Insurance Paid To

• The seller has the same responsibilities as CPT, but they also contract for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
• The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

DAP – Delivered At Place

• The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.
• The seller bears all risks involved in bringing the goods to the named place.

DPU – Delivered At Place Unloaded 

• DPU is a new Incoterm rule that replaces the former Incoterm DAT (Delivered At Terminal).
• The seller delivers when the goods are unloaded and placed at the disposal of the buyer at a named place of destination.
• The seller bears all risks involved in bringing the goods to, and unloading them at the named place of destination.​ ​

DDP – Delivered Duty Paid

• The seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.
• The seller bears all the costs and risks involved in bringing the goods to the place of destination. They must clear the products not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
• Under DDP, the seller pays for all shipping costs, including import customs clearance, import duties & taxes, and any additional charges involved in delivering the goods to the named place of destination.

New Incoterm DPU Replaces DAT

The previous Incoterm DAT (Delivered at Terminal) is now called DPU (Delivered at Place Unloaded.  It was decided to change the term to DPU to remove confusion that arose in the past. In the past, DAT required ‘Delivery at Terminal (unloaded)’, however the word “terminal” caused confusion.  The new term DPU (Delivery at Place Unloaded) covers ‘any place, whether covered or not’.
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Different level of insurance cover between CIF and CIPCIF and CIP are the only two Incoterms that require the seller to purchase insurance in the buyer’s name.  Under Incoterms 2010 the insurance cover for both CIF and CIP was required under Institute Cargo Clause C. Under the new Incoterms 2020, CIP requires insurance cover complying with Institute Cargo Clause A.  Clause A covers a more comprehensive level of insurance which is usually suitable for manufactured goods, where Clause C would likely apply to commodities.
In summary:

• CIF remains the same, it requires ‘Institute Cargo Clause C’ insurance cover – Number of listed risks, subject to itemized exclusions.
• CIP now requires an upgraded ‘Institute Cargo Clause A’ insurance cover – All risk, subject to itemized exclusions.