INCOTERMS 2010

Lecturer: MSc. Nguyen Hoang Huy

Source: Ms. Vo Quynh Mai
ISE Department
Reading Materials
• Incoterms 2010 by the International Chamber of Commerce
(ICC)
• Blackboard
• https://iccwbo.org/resources-for-business/incoterms-
rules/incoterms-rules-copyright/
INCOTERMS : International Commercial Terms
INCOTERMS define the mutual obligations of seller and buyer
arising from the movement of goods under an international
contract from the standpoint of risks, costs and documents
(UNCTAD, 1990)
Provide an Internationally accepted definition of:
 The responsibilities of Buyer and Seller
 The allocation of delivery costs
 The assumption of delivery risks

Should be referred to as ‘Rules’

INCOTERMS 2010
• Incoterms 2010 was announced in September 2010 and went
into effect in January, 1st 2011
• The number of Incoterms rules is reduced from 13 to 11. Two
new Incoterms rules – DAT and DAP – have replaced the
Incoterms 2000 rules DAF, DES, DEQ and DDU

WHY ARE THEY IMPORTANT?

• Avoids different interpretations in different countries
• Simplify the negotiations involved in international commerce.
• Ensure common understanding of obligations
 Explanation of terms used in the Incoterms®
2010 rules
• Carrier: the party with whom carriage is contracted.

• Customs formalities: requirements to be met in order to comply with any applicable

customs regulations and may include documentary, security, information or physical
inspection obligations.

• Delivery: indicate where the risk of loss of or damage to the goods passes from the seller to
the buyer.

• Delivery document: a document used to prove that delivery has occurred.

• Electronic record or procedure: A set of information constituted of one or more electronic

messages and, where applicable, being functionally equivalent with the corresponding paper
document.

• Packaging: different meanings

– The packaging of the goods to comply with any requirements under the contract of sale;
– OR The packaging of the goods so that they are fit for transportation;
– OR The stowage of the packaged goods within a container or other means of transport.
The Steps of Global Logistics
Customs Clearance
for Export
2 3 4
Handling
Loading Outbound
1 Preliminary
Transportation
5
Packing
6
Insurance
Main
Customs International
Clearance Transportation 7
Duties

11 10 9 8

Unloading Final Handling

Transportation Inbound
 Classification of the 11 Incoterms®
2010 rules – mode of transportation
RULES FOR ANY MODE OR MODES OF RULES FOR SEA AND INLAND
TRANSPORT WATERWAY TRANSPORT
Rules that can be used irrespective of the
mode of transport selected and the number The point of delivery and the place
of mode of transport is employed to which the goods are carried to
EXW EX WORKS
the buyer are both ports
FCA FREE CARRIER FAS FREE ALONGSIDE SHIP
CPT CARRIAGE PAID TO FOB FREE ON BOARD
CIP CARRIAGE AND INSURANCE PAID TO
CFR COST AND FREIGHT
DAT DELIVERED AT TERMINAL
CIF COST INSURANCE AND FREIGHT
DAP DELIVERED AT PLACE

DDP DELIVERED DUTY PAID

Classification of the 11 Incoterms® 2010 rules
– responsibility
“E” Term: Buyer responsible for all carriage; EXW
seller’s obligation is at its minimum
“F” Term: Buyer arranges main carriage FAS; FOB; FCA
“C” Term: Seller arranges main carriage, risk CFR; CIF; CPT; CIP
passes after main carriage
“D” Term: Seller arranges main carriage, but DAT; DAP; DDP
risk passes before main carriage

IMPORTANT DISTINCTION
• SINGLE-POINT TERM: Both costs and risks are transferred from the seller
to the buyer at the same point in time (E, F and D terms).
• TWO-POINT TERM: Costs and risks are transferred from the seller to the
buyer at different points in time (risks before costs) (C terms).
 Incoterms regulations
What do INCOTERMS What do INCOTERMS not
regulate? regulate?
• The principal duties of the seller • Questions of ownership

• The principal duties of the buyer • Breach of contract and the legal
consequences
• Transfer of risks – place and point in
time • Declarations of indemnity

• Allocation of all costs incurred from • Delivery options

dispatch to arrival at the place or
port of destination • Modes of payment

• Formalities (e.g. customs formalities) • Applicable Law

for import, export or transit
 INCOTERMS 2010 - THE INCOTERMS 2010 - THE
SELLER’S OBLIGATIONS BUYER’S OBLIGATIONS
A1 Provision of goods in conformity with the B1 Payment of the price
contract
B2 Licenses, authorizations and formalities
A2 Licenses, authorizations and formalities
B3 Contract of carriage
A3 Contract of carriage and insurance
B4 Taking delivery
A4 Delivery
B5 Transfer of risks
A5 Transfer of risks
B6 Division of the costs
A6 Division of costs
B7 Notice to the seller
A7 Notice to the buyer
B8 Proof of delivery, transport document of
A8 Proof of delivery, transport document or equivalent electronic message
equivalent electronic message
B9 Inspection of goods
A9 Checking – packaging – marking
B10 Other obligations
A10 Other obligations
 Rules for any mode or
mode or modes of modes
of transport

EXW, FCA, CPT, CIP, DAT, DAP, DDP

1. EXW (insert named place of delivery)
EX WORKS
The seller minimizes his risk by only making the goods available
at his own premises or at another named place (i.e., works,
factory, warehouse, etc.)
.
EXW = Ex Works
Seller’s Obligation
• Make the goods available, suitably
packaged, at the specified place,
usually the seller’s factory or
depot.
• Not responsible for loading the
goods on the vehicle provided by
the buyer
Buyer’s Obligation
• Load the goods onto a vehicle
(even though the seller may be
better placed to do this);
• Clear the goods for export and
import

• Not responsible for clearing the

goods for export, unless agreed.
Transfer of risks

• buyer bears all risks of loss of or damage to the goods from the time they
have been delivered
 2. FCA – FREE CARRIER (insert named place of
delivery)
“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.
Delivery is completed when:
• goods have been loaded on the means of transport provided by the buyer
• Or goods are placed at the disposal of the carrier or another person nominated by
the buyer.
FCA – FREE CARRIER
Seller’s Obligation
• Clear export customs
• Deliver goods to carrier
• Provide evidence of delivery
Buyer’s Obligation
• Arrange transport to the final
destination once the goods have
been delivered: Nominate carrier;
Contract carriage
• Clear for import and handle for
any import formalities

• Pay freight

Transfer of risks

• buyer bears all risks of loss of or damage to the goods from the time they
have been delivered
Notes about FCA
• FCA is the preferred term to use for sending goods to a freight
forwarder
• The carrier is responsible for unloading the goods.
• In the event, goods have been sitting at a forwarders’
warehouse for weeks and have become damaged, the buyer
not the seller would be responsible for filing a claim for loss or
damages
3. CPT – CARRIAGE PAID TO (insert named
place of destination)
• “Carriage Paid To”: the seller delivers the goods to the carrier or
another person nominated by the seller at an agreed place; the seller
must contract for and pay the costs of carriage
• Transfer of risks: when the goods have been delivered to the first carrier
• Note: costs and risks transferred at 2 different points
CPT – CARRIAGE PAID TO
Seller’s Obligation
• Contract for and pay the costs of
carriage
• Deliver the goods to the (first)
carrier
• Pay the freight costs for carriage
of the goods to the named place
of destination
Buyer’s Obligation
• Take delivery of goods from the
carrier
• Pay the costs which according to
the contract of carriage are not
borne by the seller
• Clear for import

• Clear the goods for export

• Not responsible for paying

insurance
 4. CIP - CARRIAGE AND INSURANCE PAID
TO (insert named place of destination)
“Carriage and Insurance Paid to”: the seller delivers the goods to the carrier or
another person nominated by the seller at an agreed place; the seller must
contract for and pay the costs of carriage and insurance.

• Transfer of risks: when the goods have been delivered to the first carrier at a
point of the seller’s choosing and over which the buyer has no control
CIP – CARRIAGE PAID TO
Seller’s Obligation
• Contract for and pay the costs of
carriage and insurance to bring the
goods to the named place of
destination.
Buyer’s Obligation
• Bear all risks to the goods from
the agreed place of delivery
• Clear for import

• Fulfils its obligation to deliver when

it hands the goods over to the
carrier and not when the goods
reach the place of destination.

• Clear the goods for export

CIP is exactly like CPT, except that the seller will pay for the insurance up
until the destination hub.
5. DAT - DELIVERED AT TERMINAL (insert
named terminal at port or place of
destination) )
“Delivered at Terminal”: the seller is responsible for arranging
carriage and for delivering the goods, once unloaded from the
arriving conveyance, at the named place. “Terminal”: quay,
warehouse, container yard or road, rail or air cargo terminal.
DAT - DELIVERED AT TERMINAL
Seller’s Obligation
• Arrange the transport of the
goods from the seller’s premises
to the terminal at the agreed port
or place of destination
• Clear the goods for export
• Pay for unloading of the goods
• Not obliged to insurance
Buyer’s Obligation
• Responsible for import clearance
and any applicable local taxes or
import duties.
• Arrange inland transport from the
named port to the final
destination
• Load goods onto the vehicle at
the named port of delivery
6. DAP - DELIVERED AT PLACE (insert named
place of destination)
“Delivered at Place” means the seller is responsible for
arranging carriage and for delivers the goods, ready for
unloading frim the arriving conveyance at the named place of
destination
DAP - DELIVERED AT PLACE
Seller’s Obligation
• Arrange transport to the named
place
• Unload the goods at the named
place
• No obligation to pay for
insurance
Buyer’s Obligation
• Responsible for import clearance
and any applicable local taxes or
import duties.
• Arrange inland transport from the
named port to the final
destination
7. DDP - DELIVERED DUTY PAID (insert named
place of destination)
“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.
DDP - DELIVERED DUTY PAID
Seller’s Obligation Buyer’s Obligation
• Arrange the carriage contract and • Receive goods at the named place
pay for unloading of the goods.

• Responsible for export clearance

• Responsible for import clearance

and any applicable local taxes or
import duties.

• No obligation to pay for insurance

Notes about DDP
• This rule places the maximum obligation on the seller, and
is the only rule that requires the seller to take
responsibility for import clearance and payment of
taxes and/or import duty.
• This term can be highly problematical for the seller. In
some countries, import clearance procedures are complex and
bureaucratic, so best left to the buyer who has local
knowledge.
 Rules for sea and inland
waterway transport

FAS, FOB, CFR, CIF

8. FAS - FREE ALONGSIDE SHIP (insert named
port of shipment)
“Free Alongside Ship”: the seller delivers when the goods are
placed alongside the vessel (e.g., on a quay or a barge) at the
named port of shipment
Transfer of risks: when the goods are alongside the ship
FAS - FREE ALONGSIDE SHIP
Seller’s Obligation
• Bear the risk until when the goods
are placed alongside the ship
• Deliver goods alongside ship
• Clear export custom
• No obligation to pay for
transportation and insurance
Buyer’s Obligation
• Bears all costs from the moment
when the goods are placed
alongside the ship onwards
• Nominate the ship, the place of
loading, the delivery time and the
carrier
• Contract for the carriage of the
goods
9. FOB - FREE ON BOARD (insert named port
of shipment)
“Free on Board”: the seller delivers the goods on board the
vessel at the named port of shipment or procures the goods
already so delivered
FOB - FREE ON BOARD
Seller’s Obligation
• Bear the risks and costs till the
goods are loaded on board the
vessel
• Pay loading costs not included in
the freight
• Clear export custom
• No obligation to pay for
transportation and insurance
Buyer’s Obligation
• Bear all risks and costs from the
moment when the goods are on
board
• Nominate the carrier
• Contract for carriage
• Clear import custom
• Arrange unloading and inland
transportation at the port of
import
Notes about FAS & FOB
• In practice, it should be used for situations where the seller
has direct access to the vessel for loading, e.g. bulk cargos or
non-containerized goods.
• For containerized goods, it is typical for the seller to hand
the goods over to the carrier at a terminal and not alongside
the vessel. “Free Carrier FCA” should be used instead.
 10. CFR - COST & FREIGHT (insert named port
of destination)
“Cost and Freight”: seller delivers the goods on board the vessel. The
seller must contract for and pay the costs and freight to bring the goods
to the named port of destination.
Transfer of risks: when the goods are on board the vessel.
 CFR - COST & FREIGHT
Seller’s Obligation Buyer’s Obligation
• Pay the costs and freight to bring • Bear all risks from the moment
the goods to the port of destination. when the goods are on board

• Contract for carriage • Clear the goods for import

• Load the goods on board

• Bear the risks until the goods are

on board

• Clear the goods for export

• No obligation to pay insurance

 11. CIF - COST INSURANCE & FREIGHT (insert
named port of destination)
“Cost, Insurance and Freight” means the seller delivers the goods
on board the vessel
Used the same way as CFR except that seller must pay for
insurance
 CIF - COST INSURANCE & FREIGHT
Seller’s Obligation
• Pay the transport insurance
premium, costs and freight to bring
the goods to the named port of
destination Contract for carriage
Buyer’s Obligation
• Bear all risks from the moment
when the goods are on board
• Clear the goods for import

• Load the goods on board

• Bear the risks until the goods are

on board

• Clear the goods for export

• No obligation to pay insurance

Allocations of costs in Incoterms
Types of costs

1.Export customs declaration

2.Carriage to port of export
3.Unloading of truck in port of export
4.Loading on vessel in port of export
5.Carriage to port of import
6.Insurance
7.Unloading in port of import
8.Loading on truck in port of import
9.Carriage to place of destination
10.Import customs clearance
11.Import taxes
Incorporate the Incoterms® 2010 rules into
your contract of sale
• If you want the Incoterms® 2010 rules to apply to your
contract, you should make this clear in the contract:
“[the chosen Incoterms rule including the named place, followed
by] Incoterms® 2010”.
• Specify your place or port as precisely as possible:
Example:
– FCA 38 Cours Albert 1er, Paris, France Incoterms® 2010
– DDP – INCOTERMS 2010 – Tokyo
– DAT – INCOTERMS 2010 – Port of Long Beach