¿What are incoterms?
International Commercial Terms. These are the official rules of the ICCC (International Chamber of Commerce’s Committee), which since 1936 have facilitated the management of international trade. They have the purpose of establishing a set of international rules for the interpretation of the commercial terms most used in international transactions, avoiding the uncertainties of any free interpretation about the delivery, risk, insurance or means of transport to use.
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At Origin
Ex Works
His responsibility is to make the goods available to the buyer at its premises in a transport adapted to the type of packaging (normally, the price includes the location of the goods on pallets).
Assumes the costs and risks involved in transport from the factory until the destination. The term EXW represents the least amount of obligations to the seller. However, if the parties wish the seller to bear the costs and risks of loading the goods on leaving ( “EXW Loaded”) it should be clearly pointed out through an explicit clause in the sales contract. It is therefore assumed that the seller provides the buyer, taking into account costs and risks, all necessary assistance to obtain an export license, insurance, giving you all the useful information at their disposal to enable the buyer export their goods safely.
“EXW Loaded”. The revision of the Incoterms in 2010 introduced the concept that recognizes a widely used practice: the seller is responsible for loading the goods on the vehicle buyer.
Free Carrier
The seller loads the goods if delivery takes place at the seller’s premises, conveniently packed in the vehicle provided by the purchaser (see “Local FCA Seller”). The payment of export tariffs is responsibility of the seller.
The buyer chooses the means of transport and the carrier with whom he want to perform the contract. The transfer of costs and risks occurs when the carrier takes over the goods. The parties must agree on a place for delivery of goods (local terminal carrier or seller). The seller must, if necessary, deliver the goods to the buyer in good time, and even give assistance in obtaining any documents or security-related necessary for export and / or import of their goods and / or transport information to the final destination. All these documents and / or the support provided, costs and risks are borne by the buyer.
“Local FCA seller”
EThis Incoterm became official in the revision of Incoterms 2000: the seller is responsible for loading the goods.
The “agreed point” should be carefully detailed. If delivery is made elsewhere that the seller’s premises, the seller will take the goods to the terminal, but will not be responsible for unloading the vehicle.
Free Alongside Ship
The seller’s obligations are fulfilled when the goods are located alongside the ship at the pier of the port of shipment and tariffs are payed.
The buyer will assume all costs and risks of loss or damage as soon as the goods have been delivered alongside the ship, especially in case of delay of the vessel or cancellation of the scale. The buyer chooses the carrier, specifies the transport contract and pays the freight.
Obtaining an export license or other official authorization is responsibility of the seller. The same goes with the buyer on import. The buyer must give the seller all information about the ship’s name, place of loading and delivery time chosen in the period agreed. The seller must, if necessary and at an appropriate time, provide or help the buyer to obtain any documents or information related to security required for export and / or import of their goods and / or for transport to the final destination.
On the way
Free on Board
The seller must provide the goods at the port of shipment aboard the vessel chosen by the buyer, and make, if necessary, customs clearance for export. In a contract of FOB type, the seller fulfills when the goods are on board on the vessel at the named port of shipment.
In this type of contract, the buyer chooses the vessel, pays the ocean freight and insurance and takes care of the formalities when the goods arrive. Assumes all costs and risks of loss or damage that may occur to the goods from the time it was delivered.
The “set FOB” is the terminology used by freight forwarders to point out that the above-shipment operations were performed, including, if necessary, payment of export tariffs. All these operations represent a cost to be paid by the seller, sometimes called “start-up costs FOB”. The “FOB stowed” and / or “FOB stowed and trimmed” is a variant. The seller bears all costs of the goods at the port of shipment. It must be stated in the contract where is the transfer of risk.
The seller must, if necessary, provide the buyer (or even help you obtain) any document or security-related necessary for export and / or import of their goods and / or for transport to their final destination information. Documents submitted and / or the assistance provided are buyer’s responsibility.
In America the FOB terms are different. In the United States, Incoterm FOB (Free on Board) does not indicate a shipment by boat or a port: indicates a destination in the United States’ border. For the US, there are four types of FOB:
– FOB / Starting point: Buyer pays all.
– FOB / Border: The manufacturer pays until the border, does not assumes the costs of tariffs on goods.
– FOB / Point of sale: The goods are sent to a particular destination. That is why the supplier pays tariffs of goods. We must always point the franc chosen point, usually the city.
– FOB / Destination with tariffs canceled: In this case, the manufacturer takes care of everything, without the aid of the buyer. DDP / Delivered also the duties are paid. Most US sales are made under this premise.
Cost and Freight
The seller chooses the carrier, closing and assumes the costs of paying the freight to the port of arrival, unloading not included. The unloading of goods with tariffs canceled on the ship is their responsibility, as clearance formalities. Moreover, the transfer of risk is the same as in FOB.
Assumes the risk of transport when the goods have been delivered on board the ship at the port of shipment; the carrier must collect and deliver at the port of destination. Seller, at its own expense, must provide the buyer with a valid transport contract to the port of destination covering contractual goods, to assert their rights (ex .: complaint of the goods to the carrier, selling the goods in transit , etc.). In addition, you must give all the necessary information to take appropriate measures to receive the goods. The information and documents related to the security needed by the buyer for export and / or import and / or transport to the final destination must be delivered by the seller to the buyer, upon requested and by its expense and risk.
Cost Insurance and Freight
Like the CFR term with the additional obligation for the seller to provide marine insurance against the risk of loss or damage of goods. The seller pays the insurance premium. The insurance must be under the minimum guarantee clauses stipulated in the powers of the Institute of London Underwriters, or any number of similar clauses. Should at least cover the price provided in the contract, increased by 10%, and should be indicated in the currency of the contract. It is an FPA (Franco of Particular Average) 110% sure of the value. It is possible to recharge up to 20% without justification. A higher surcharge may be admitted by insurers if warranted. This surcharge value is used to cover expenses for damage (cost of preparing the dossier and monitoring, mapping, etc.) and financial losses (interest) between the time of loss and compensation by insurers.
Assumes the risk of transport when the goods have been delivered on board the ship at the port of shipment. You should check and receive the goods from the carrier at the port of destination.
Buyers appreciate this Incoterm, because they are released from the logistical formalities.
The information and documents related to security that requires the buyer for export and / or import and / or transport to the final destination must be delivered by the seller to the buyer, upon request and assuming the costs and risks.
Carriage Paid to
The seller coordinates the logistics chain. After being in charge of export tariffs, choose the carriers and pays the costs to the agreed place.
The risks of damage or loss are borne by the buyer from the moment the goods have been delivered to the first carrier. Then, the buyer is responsible for paying import duties and unloading costs.
In the CPT term, the risks and costs transfer occurs in different points. It is therefore recommended that the parties indicate with precision in their contract, both the place of delivery in which the risk passes to the buyer as the place of destination where the seller concludes a contract of carriage.
Carriage and Insurance Paid to
CIP is the same as CPT, but the seller must also provide an insurance for transportation. The seller closes the transport contract, pays the freight and insurance premium.
Risks of damage or loss are borne by the buyer from the moment the goods have been delivered to the first carrier. Then, the buyer is responsible for the payment of duties and import taxes and unloading costs.
According to the CIP term, the seller is only required to take out insurance with a minimum coverage. If the buyer wants to be protected with a wider coverage in those conditions must obtain authorization from the seller, or hire himself out additional insurance.
At Destination
Delivery at terminal
You must deliver the goods making them available to the buyer at the agreed terminal at the port or place of destination on the date or within the agreed deadlines. The seller must sign a contract (which runs on your own) to transport the goods to the terminal, and unload the goods the means of transport in question.
The seller is not required faced with the purchaser to have insurance. However, you must provide the buyer (assuming the costs) the document that allows you to specify the receipt of goods. The Incoterm DAT requires the seller pays export tariffs of goods; however, it does not require him to pay import tariffs.
You must receive the goods as soon as they have been delivered and pay the price as has been agreed in the sales contract. The buyer must inform the seller also about the need to provide all information related to security required for the export, import, and transport of goods to their final destination.
This standard was created specifically for container transport. It also adapts to conventional shipping, when the seller wants to keep the risks of unloading the vessel at the port of destination. It should then specify the place where the goods will be made available (dock, ready for shipment…).
Delivery At Place
You must deliver the goods available to the buyer with the right transport, ready for unloading and at destination. You must pay export tariffs, but not import tariffs. In turn, the seller must contract for carriage of the goods to the destination and download them upon arrival. It must provide the buyer the document that allows you to receive the goods, without obligation to purchase insurance.
You must pay the price of the goods as provided in the contract of sale, and receive the goods as soon as they have been delivered.
Delivered Duty and Paid
The seller, in this case, has the highest obligations: the transfer of expenses and risks is effected at the time of delivery where the buyer has requested. Payment of import duties are also responsibility of the seller.
Receive the goods at place of destination and pay the costs of unloading.
DDP is the opposite to EXW. Both parties may exclude from the seller’s obligation some payments linked to the import of the goods. E.g. DDP, VAT unpaid.